Which of the following statements is false?
A) The price-to-book ratio measures the market's value of the firm relative to balance sheet equity.
B) The equity multiplier ratio is calculated as owners' equity divided by total assets.
C) The degree of operating leverage measures the sensitivity of operating income to changes in the level of output.
D) Ratio analysis allows for comparison of firms of different sizes.

Question

Quizplus · Accepted Answer

The equity multiplier ratio is actually calculated as total assets divided by owners' equity, not the other way around. This ratio is a measure of financial leverage, indicating how much of a company's assets are financed by equity.

Which of the Following Statements Is False