TRUE OR FALSE FOR ALL.

1. The relationship between debt and return on assets (ROA) is called "the leverage effect."

2. It is possible to correctly compute a ratio, but then make a serious error by "expressing" it improperly. For example, you might compute the current ratio to be 2.00, but make an error by expressing it as 200%.

3. Balance Sheet leverage and Income Statement Leverage are completely separate phenomenons. For example, it is possible to have very high balance sheet leverage, but no income statement leverage at all.

4. One of the basic principles of leverage is that fixed costs on the income statement magnify changes in sales.

5. If the firm does not have any non-operating items, then EBIT = Operating Profit.

6. The higher the tax rate, the bigger the difference between the pre-tax yield and the after-tax yield on a corporate bond.