Explain the False Consensus Effect and the False Uniqueness Effect

question 26

Short Answer

Explain the false consensus effect and the false uniqueness effect with examples.

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Definitions:

Equity Multiplier

A metric indicating the proportion of a firm's assets funded by owner's equity.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations with its operating income.

Debt-To-Equity Ratio

An evaluation measuring how shareholder equity contrasts with debt in the economic arrangement to finance a company's assets.

Equity Multiplier

A ratio of financial leverage which quantifies the fraction of a company's assets funded by the equity of its shareholders.