QUESTION 11Which of the following statements is true?O A. The DuPont Identity is used to calculate Return on Assets.O B. A company can imporve their P/E ratio by improving their EPS.OC.A Market to Book ratio greater than 1 always means the stock is undervalued.O D. All of the statements are false.

Introduction: Ratio analysis refers to the technique for comparing the relationship or the ratio…

Answered: Which of the following statements is…

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

Chapter4: Profitability Analysis

Section: Chapter Questions

Problem 2BEIC

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10.Which of the following statement on stock valuation is incorrect?a.In dividend discount model, the stock value is the present value of all future dividends.b.We may use the dividend discount model to value all firms. c.Enterprise value is the sum of equity and debt minus cash. d.We may use price-earnings ratio to compute the value to comparable firms.
44. Which of the following is a false statement concerning the market value of a company? All else the same, the higher the ROE expected by investors, the greater the market value Market value equals book value plus retained earnings Market value equals price per share multiplied by number of shares Market value is forward looking; book value reflects the past
1(i) The Book Value of Equity includes: a) Cash Flows from operating costs. b) retained earnings. c)Only the value of Treasury stock. d) Cash flows from investing activities. 1(ii) Zero serial correlation between stock market returns over a pre-defined one-period time interval validates: a)Systematic variations in stock market returns. b)Weak Form Efficiency с)Non-zero covariance between stock returns d)Semi-strong Form Efficiency
25. For financial reporting purposes of stock appreciation rights, (1) Compensation expense is recorded in each period prior to exercise based on the excess of market value at the end of each period over a predetermined amount. (2) Compensation expense is adjusted up or down as the market value of the stock changes before the measurement date (which is the exercise date). Therefore, compensation expense could be credited (reduced) if the stock’s market value drops from one period to the next. a. neither S1 nor S2 is correct b. S1 and S2 are correct c. only S1 is correct d. only S2 is correct
consider the following data RF= 4.15% RPM = 5.35% and B= .85 based on the CAPM approach what is the cost of equity from retained earnings?
Match each definition that follows with the term (a–h) it defines. Question 7 options: a company's ability to make interest payments and repay debt at maturity focuses on a company’s ability to generate net income useful for comparing one company to another or to industry averages use debt to increase the return on an investment measures the risk that interest payments will not be made if earnings decrease the percentage analysis of the relationship of each component in a financial statement to a total within the statement a percentage analysis of increases and decreases in related items on comparative financial statements an analysis of a company’s ability to pay its current liabilities 1. solvency 2. leverage 3. times interest earned 4. horizontal analysis 5. vertical analysis 6. common-sized financial statements 7. current position analysis 8.…
FE1 Show your work for problem solving questions. If you use one or more sources of information in preparing any answer, provide an APA-style reference, identify any quoted information, and cite a reference wherever it is used. How would each of the following events change the equilibrium financial market value of a company? (a)an increase in its cost of production; (b) an increase in its cost of financing; (c) an increase in the market’s discount rate; (d) an increase in its sales revenue; and (e) an increase in its projected future profits.
7. Free Cash Flow to Equity can be less than net income.(true or false with reason) 8. An increase in stock price leads to lower implied cost of equity.(true or false with reason) 9. The dividend discount model will generally undervalue stocks relative to free cash flow to equity model.(true or false with reason) 10. Once a firm reaches steady state, the profit margins grow at the rate ‘g’.(true or false with reason) 11. The Price to EBITDA ratio should not be used for relative valuation.(true or false with reason) 12. It is easier to value firms using FCFF as it does not require information about leverage. (true or false with reason)
Question 4 A. Contrast the nominal rate of interest with the real rate of interest. B. Why would “a belief in the segmented markets theory of the term structure” implies “a belief in market inefficiency”. C. Suppose you purchased a stock at the end of 2017 and sold it at the end of 2019. The year-end stock prices are shown below and the stock paid no dividends. 2017 2018 2019 $100 $112 $100 (i). Compute the average annual return according to the arithmetic mean method. (ii). Compute the average annual return according to the geometric mean method. (iii). Compare the results in (i) and (ii), and indicate which is more intuitively appealing in assessing the performance of your investment. Question 5 A. What does it mean to say that a bond has a value less than one for its relative yield differential? What might account for such a difference? B. Why is the maturity of some bonds ambiguous? C. Assume the following characteristics for a particular bond: Face…
6. Corporation A traded at a P/B (price-to-book) ratio of 0.5. Its most recent reported ROCE is 10% and its cost of equity is also about 10%. Which of the following is most likely to be true?A. On average, the market expects future ROCEs to increase to above 10%;B. On average, the market expects future ROCEs to decrease to below 10%;C. On average, the market expects future ROCEs to maintain at 10%;D On average, the market does not know what to expect.

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