If a firm's assests are measured at their-fair (intrinsinc) value, one must forecast that residual earnings from those assests will be zero. True OR False
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- D All else being equal, which one of the following will decrease a firm's current ratio? Question 17 a decrease in the net fixed assets a decrease in depreciation O a decrease in accounts payable O a decrease in a counts receivablesWhich of the following is a disadvantage of the average rate of return method? a. fails to consider the time value of money b. includes the amount of income earned over the entire life of the proposal c. emphasizes accounting income d. difficult to use- Firm may invest heavily, but that investment while producing earnings may not add value if operating income is below required return on net operating assets. True or False
- When estimating a relative valuation for a firm or project with zero or negative earnings, where EBITDA or P/E multiples are not useful, an alternative valuation ratio could include a. market to book value of equity.b. enterprise value to sales.c. price per square foot.d. all of the above. e. none of the above.The difference between the market value of the firm and the amount of laiabilities in the firm is known as market value added. Select one: True FalseIs the following sentence true or false? Please explain. The cost of new equity (re) could possibly be lower than the cost of reinvested earnings (rs) if the market risk premium, risk-free rate, and the company's beta all decline by a sufficiently large amount.
- The market-to-book ratio is the ratio of a firm that reports negative retained earnings on its equity statement is less than one (i.e, market value of equity is less than book value of equity) True OR FalseWhich of the following statements is FALSE?i. Using the payback rule, you can calculate how much profits are earned over the investment period.ii. The IRR is sensitive to the timing of the cash flows.iii. Shareholders have the first claim on the cash flows of the company.Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile? ... O A. They do not tell how the decision affects the firm's reported profits from an accounting perspective. O B. They are not easily predicted from historical financial statements of a firm and its competitors. O C. They do not show how the firm's earnings are expected to change as the result of a particular decision. O D. These earnings are not actual cash flows.
- Which of the following statements are true about the interest-burden ratio? Check all that apply: It can be expressed as EBIT/Interest Expense. If the company has no financial leverage, the interest-burden ratio will be equal to 0. A company with higher financial leverage will have a lower interest-burden ratio. If the company has no financial leverage, the interest-burden ratio will be equal to 1. It can be expressed as Net profits/Pretax profits.Which of the following statement is correct? O Inventory Turnover Ratio is a measure of how much the market is willing to pay (per share) for one dollar's worth of the firm's recorded earnings per share, and it is measure of the market's perception as to the future earnings potential of the firm. All the answers are incorrect. The times interest earned ratio is equal to Earnings Before Taxes (EBT) divided by Debt, and it is often used to assess a company's ability to service the interest on its debt with operating income from the current period. Asset activity ratios measure the ability of a firm to meet its short-term obligations. O When the investors have more confidence about the firm's future growth, then the higher P/E ratio is expected.3. Price/earnings ratios are ____ for firms with ____ expected earnings and ____ expected required ratesof return.a. higher; higher; higherb. lower; lower; lowerc. higher; lower; higherd. higher; higher; lowere. higher; lower; lower