Answered: (a) Enumerate four (4) factors to…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 10QE

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(a) Enumerate four (4) factors to consider in analyzing the domestic economy as part of fundamental analysis.
(b) Distinguish between time limit orders and Limit orders.
(c) Explain the following Investment ratios and indicate how they are computed:
Earnings per share (EPS) and Price/Earnings ratio (P/E).
(d) What is market efficiency? Differentiate between weak and semi strong form efficiency

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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