Indicate whether the following statements are TRUE (1) or FALSE (F). No points will be deducted for the first wrong answer.

1. Lower profit margin ratio (Net Income/Sales) suggests less sales discount and better cost control.

2. Higher asset turnover (Sales/Average Total Assets) ratio suggests more efficient utilization of assets.

3. Higher times interest earned ratio (Income before Interest and Taxes/Interest Expense) suggest better long-term solvency.

4. Increasing the debt-to-equity ratio (Debt/Equity) is always beneficial for the company.

5. Statement of cash flows can help assess liquidity risk of a company.

6. Companies with intangible assets are generally easier to value than companies with only tangible assets.

7. The cost flow assumption used to account for inventory valuation has to be consistent with the physical flow of goods.

8. LIFO inventory values are generally more meaningful than FIFO inventory values for computing current ratios (current assets over current liability).

9. Notes to financial statements can provide significant information beyond that contained in the financial statements.

10. Debt agreement may contain restrictions that prevent borrowers from distributing unlimited dividends to shareholders.

11. A borrower may be able to relax its debt restrictions by changing accounting methods it uses for financial reporting.

12. Depreciation amount used by a firm to prepare income statement for a given period need not be the same as the depreciation amount it uses to prepare its tax returns (to compute its tax obligation to the government for that period).

13. Managers are not responsible for the accuracy of companies financial statements.