Question 1

Economics teaches that,in equilibrium,firms will earn a return equal to the ______________________________.

Accepted Answer

The answer of Economics teaches that,in equilibrium,firms will earn a...

Question 2

The PEG ratio does not take into account differences in ____________________ and ________________________________________ across firms.

Accepted Answer

risk,cost

Question 3

The use of P/E ratios in valuation can result in measurement bias.What two items can result in measurement error and why?

Accepted Answer

The answer of The use of P/E ratios in valuation...

Question 4

Why is book value often meaningless? What improvements to financial statements would make it more meaningful?

Accepted Answer

Book value is based on a mixtu

Question 5

Book value per share may not approximate market value per share because:

Accepted Answer

A)  Land may have substantially increased in value. 
B)  Market value reflects future potential earning power. 
C)  Investments may have a market value substantially above the original cost. 
D)  All of these are reasons why book value per share may not approximate market value per share. 
A)  Land may have substantially increased in value. 
B)  Market value reflects future potential earning power. 
C)  Investments may have a market value substantially above the original cost. 
D)  All of these are reasons why book value per share may not approximate market value per share.

Question 6

All of the following are accounting factors that will cause a firm's value-to-book ratio to decrease over time except:

Accepted Answer

A)  recognizing unrealized gains on assets 
B)  a loss of competitive advantage through changes in technology or other factors 
C)  earning a high ROCE (above the equity cost of capital)on off-balance-sheet R&D assets 
D)  earning a high ROCE (above the equity cost of capital)on off-balance-sheet intangible assets (such as brand equity)over time 
A)  recognizing unrealized gains on assets 
B)  a loss of competitive advantage through changes in technology or other factors 
C)  earning a high ROCE (above the equity cost of capital)on off-balance-sheet R&D assets 
D)  earning a high ROCE (above the equity cost of capital)on off-balance-sheet intangible assets (such as brand equity)over time

Question 7

Firms with low P/E ratios tend to have current residual income that is greater than _____________________________________________.

Accepted Answer

future res

Question 8

Explain the analysts' role in making the capital markets efficient.

Accepted Answer

Analysts play a key role in making the c

Question 9

All of the following are economic factors that will decrease a firm's value-to-book ratio over time except:

Accepted Answer

A)  decreasing competition that drives the firm's ROCE down 
B)  increasing systematic risk that increases the firm's equity cost of capital over time 
C)  a loss of competitive advantage through changes in technology or other factors 
D)  retaining earnings or issuing equity capital and deploying the capital in activities that generate ROCE levels that are lower than current levels 
A)  decreasing competition that drives the firm's ROCE down 
B)  increasing systematic risk that increases the firm's equity cost of capital over time 
C)  a loss of competitive advantage through changes in technology or other factors 
D)  retaining earnings or issuing equity capital and deploying the capital in activities that generate ROCE levels that are lower than current levels

Question 10

Under the value-to-book model a firm will be valued below book value when:

Accepted Answer

A)  the ROCE is greater than RE 
B)  the ROCE is equal to RE 
C)  the ROCE is less than RE 
D)  the firm's growth rate is above the industry average 
A)  the ROCE is greater than RE 
B)  the ROCE is equal to RE 
C)  the ROCE is less than RE 
D)  the firm's growth rate is above the industry average

Question 11

The market price of a share of common equity reflects:

Accepted Answer

A)  the aggregated expectations of all of the market participants following that particular stock. 
B)  the present value of future residual income. 
C)  book value plus the present value of future residual income. 
D)  the correct value for the particular stock. 
A)  the aggregated expectations of all of the market participants following that particular stock. 
B)  the present value of future residual income. 
C)  book value plus the present value of future residual income. 
D)  the correct value for the particular stock.

Question 12

The risk of the firm increases the _____________________________________________.

Accepted Answer

equity cos

Question 13

The ______________________________ represents the value of the firm,based on book value of equity and forecasts of expected future earnings,in the absence of discounting for risk.

Accepted Answer

risk-neutr

Question 14

Which of the following is not a reason why price-earnings ratios would differ across firms?

Accepted Answer

A)  Risk 
B)  Profitability 
C)  Growth 
D)  Operating leverage 
A)  Risk 
B)  Profitability 
C)  Growth 
D)  Operating leverage

Question 15

Analysts use the PEG ratio to assess share price relative to earnings and _________________________________________________________________.

Accepted Answer

expected f

Question 16

One with the price-earnings ratio commonly reported is that:

Accepted Answer

A)  it divides share price,which reflects the present value of future earnings by historical earnings. 
B)  it divides share price,which reflects the present value of book value by historical earnings. 
C)  it does not take into consideration the present value of future earnings. 
D)  it is based on analysts' expectations. 
A)  it divides share price,which reflects the present value of future earnings by historical earnings. 
B)  it divides share price,which reflects the present value of book value by historical earnings. 
C)  it does not take into consideration the present value of future earnings. 
D)  it is based on analysts' expectations.

Question 17

What information can a PEG ratio provide about a company's stock price? What does a PEG ratio greater than one mean? Less than one?

Accepted Answer

Analysts use the PEG ratio as a rule of

Question 18

Strictly speaking,the price-earnings ratio assumes that firm value is the:

Accepted Answer

A)  future value of a constant stream of expected future earnings,discounted at a constant expected future risk-free rate. 
B)  future value of a constant stream of expected future earnings,discounted at a constant expected future discount rate. 
C)  present value of a constant stream of expected future earnings,discounted at a constant expected future risk-free rate. 
D)  present value of a constant stream of expected future earnings,discounted at a constant expected future discount rate. 
A)  future value of a constant stream of expected future earnings,discounted at a constant expected future risk-free rate. 
B)  future value of a constant stream of expected future earnings,discounted at a constant expected future discount rate. 
C)  present value of a constant stream of expected future earnings,discounted at a constant expected future risk-free rate. 
D)  present value of a constant stream of expected future earnings,discounted at a constant expected future discount rate.

Question 19

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=RE will be valued at _________________________.

Accepted Answer

Economics teaches that,in equilibrium,firms will earn a return equal to the ______________________________.

The PEG ratio does not take into account differences in and ____________________ across firms.

The use of P/E ratios in valuation can result in measurement bias.What two items can result in measurement error and why?

Why is book value often meaningless? What improvements to financial statements would make it more meaningful?

Book value per share may not approximate market value per share because:

All of the following are accounting factors that will cause a firm's value-to-book ratio to decrease over time except:

Firms with low P/E ratios tend to have current residual income that is greater than _____________________________________________.

Explain the analysts' role in making the capital markets efficient.

All of the following are economic factors that will decrease a firm's value-to-book ratio over time except:

Under the value-to-book model a firm will be valued below book value when:

The market price of a share of common equity reflects:

The risk of the firm increases the _____________________________________________.

The ______________________________ represents the value of the firm,based on book value of equity and forecasts of expected future earnings,in the absence of discounting for risk.

Which of the following is not a reason why price-earnings ratios would differ across firms?

Analysts use the PEG ratio to assess share price relative to earnings and _________________________________________________________________.

One with the price-earnings ratio commonly reported is that:

What information can a PEG ratio provide about a company's stock price? What does a PEG ratio greater than one mean? Less than one?

Strictly speaking,the price-earnings ratio assumes that firm value is the:

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=R_E will be valued at _________________________.

Overview of Financial Reporting,financial Statement Analysis,and Valuation

Asset and Liability Valuation and Income Recognition

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Accounting Quality

Financing Activities

Investing Activities

Operating Activities

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Filters

Exam 14: Valuation: Market-Based Approaches

Economics teaches that,in equilibrium,firms will earn a return equal to the ______________________________.

The PEG ratio does not take into account differences in ____________________ and ________________________________________ across firms.

The use of P/E ratios in valuation can result in measurement bias.What two items can result in measurement error and why?

Why is book value often meaningless? What improvements to financial statements would make it more meaningful?

Book value per share may not approximate market value per share because:

All of the following are accounting factors that will cause a firm's value-to-book ratio to decrease over time except:

Firms with low P/E ratios tend to have current residual income that is greater than _____________________________________________.

Explain the analysts' role in making the capital markets efficient.

All of the following are economic factors that will decrease a firm's value-to-book ratio over time except:

Under the value-to-book model a firm will be valued below book value when:

The market price of a share of common equity reflects:

The risk of the firm increases the _____________________________________________.

The ______________________________ represents the value of the firm,based on book value of equity and forecasts of expected future earnings,in the absence of discounting for risk.

Which of the following is not a reason why price-earnings ratios would differ across firms?

Analysts use the PEG ratio to assess share price relative to earnings and _________________________________________________________________.

One with the price-earnings ratio commonly reported is that:

What information can a PEG ratio provide about a company's stock price? What does a PEG ratio greater than one mean? Less than one?

Strictly speaking,the price-earnings ratio assumes that firm value is the:

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=RE will be valued at _________________________.

Overview of Financial Reporting,financial Statement Analysis,and Valuation

Asset and Liability Valuation and Income Recognition

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Accounting Quality

Financing Activities

Investing Activities

Operating Activities

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Filters

The PEG ratio does not take into account differences in and ____________________ across firms.

The value-to-book model indicates that a firm in steady state equilibrium earnings ROCE=R_E will be valued at _________________________.