The readings for module 3 explain that past performance for a company or stock is not a guarantee of future performance. Yet many models for stock and company valuation link the value of past performance to future expectations. If there is no guarantee, why do you think that past performance is used to predict future company performance and stock returns?

Q: How does the accrual accounting system impact the financial statements and the standing positions of…

A: Meaning Of Accrual Accounting:- In financial accounting, accruals refer to the recording of revenues…

Q: Fundamental analysis is least likely to: a. Use security trends because it attempts to determine the…

A: Fundamental analysis is doing analysis of fundamental of company on the basis of sales, growth and…

Q: Which of the following statements is incorrect? Select one: A. It is possible for markets to be…

A: According to the efficient market hypothesis, all the information available in the market is…

Q: __________ focus more on underlying determinants of future profitability than the past price…

A: The investor predicts the future price movements of the stocks using past patterns. Different…

Q: Explain the effect of D/E on asset returns, equity returns (assuming that cost of debt is not…

A: Three main actors of production namely land, labor and capital are given primary importance. Capital…

Q: 2)      __________ focus more on underlying determinants of future profitability than the past price…

A: Answer Technical analysts believe past trading activity and price changes of a security can be…

Q: There will likely be a difference between your calculation of the Company’s intrinsic value and its…

A: Intrinsic value is the true or inherent value of a company. It is a fundamental value which is…

Q: Evaluate the following:Managers should not focus on the current stock value because doing so will…

A: The stock price of the company reflects all the future cash flows that the entity is expected to…

Q: The small firm effect refers to the observed tendency for stock prices to behave in a manner that is…

A: The small firm effect: In the financial markets, the small firm effect refers to the phenomenon that…

Q: How can the Stock price be a good indicator of your company's financial health and may also reflect…

A: In order to examine the financial position of the company investor generally study and analyse the…

Q: Choose the correct. Which of the following is not included in the assumption on which Myron Gorden…

A: Gorden Proposed Model: The market value of share is equal to the present value of future dividends.…

Q: “When the stock market declines the net worth of companies decreases, causing the problem of…

A: Asymmetric information exists in every transaction when one party possesses knowledge that the other…

Q: Which of the following statements is CORRECT? a. The SML shows the relationship between companies'…

A: The objective of the question is to identify the correct statement among the given options related…

Q: Which of the following statements is false regarding the abnormal earnings approach to valuation?…

A: Abnormal earning valuation This method of valuation helps to determine company’s net worth based on…

Q: "Financial manager

A: Financial managers are the person who is responsible for the financial health of the company and…

Q: Which of the folowwing statements about a company's stock valuation is incorrect? Select one: a.…

A: The company's stock valuation is the function of amount of cashflow and timing of the cashflow

Q: statement is true or false, based on the knowledge of the different theories and mo

A: Stock prices are determined by market movements and prices may go up and down depending on supply…

Q: Which of the following best describes why the predicted incremental earnings arising from a given…

A: Solution:- Incremental earning that we get from a project are not enough to find out that the…

Q: ween common stock and retained earnings.     The AFN equation produces more accurate forecasts…

A: Financial forecasting is the practise of estimating or forecasting a company's future performance. A…

Q: excel

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Determine whether stock prices are affected more by long-term or short-term performance. Provide an…

A: Stock prices are affected by long term performance and not short term. In practice though short term…

Q: Technical Analysis (the practice of analyzing past stock price and volume data in order to predict…

A: The efficient market hypothesis (EMH), also known as the efficient market theory, claims that stock…

Q: Which of the following statements regarding the PE ratio is true? A high PE ratio is indicative of a…

A: The Price Earnings Ratio (PE Ratio) is the ratio of the market price of a share to its earnings. In…

Q: "If a stock had high returns so far, it will have low returns in the future". Discuss whether this…

A: Introduction : In simple words, the return refers to the amount of profit an investor will get from…

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.