Reference no: EM133059841

1. Transactions that increase current assets and current liabilities by the same amount improve a positive current ratio.

2. The company's acid test ratio will always be less than or equal to its current ratios.

3. The first step in financial forecasting is to decide how to raise funds.

4. When the tax rate decreases, the amount of free cash flow will increase.

5. When the stock market price is less than the intrinsic value, the stock is said to be underpriced,so regular investor would not buy a share.

6. Additional funds needed are the cash flow available for distribution to all the company's investors after the company has made all investment necessary to sustain ongoing operations.

7. The internal growth rate should be greater or equal to the sustainable growth rate.

8. Free cash flow differ from net cash flow because it takes into consideration the firm's investment in working capital and fixed asserts.

9. The higher the earnings per share, the higher the amount of earnings actually distributed to the stockholders.

10. A growth rate target higher than the internal growth rate must be financed either by debt or equity.

11. Purchase of inventory on account would increase the acid test ratio.

12. According to Dupont analysis, an increase in net profit margin will decrease return on assets.

13. Net cash flow represents the accounting profit added by depreciation and other non-cash deduction.

14. A company can improve its acid test ratio by selling some equipment it no longer need for cash.