What Is a Reference Point

question 14

Multiple Choice

What is a reference point?

• A) the value of a good on the black market
• B) the point from which an individual makes a consumption decision
• C) a subjective valuation of a good
• D) the minimum price that an individual would sell a good that she currently owns
• E) none of the above

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Definitions:

Enterprise Multiple

A ratio used to determine the value of a company that takes into account its debt and equity, calculated by dividing the enterprise value by EBITDA.

EBIT

Known as Earnings Before Interest and Taxes, this financial gauge calculates a firm's profitability without considering interest and income tax charges.

Average Collection Period

The average number of days it takes for a company to collect payments from its customers, a measure of the efficiency of its credit policies.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.