Company a and Company B Operate in the Same Industry

question 30

Multiple Choice

Company A and Company B operate in the same industry. Company B has a price-to-book ratio that is much higher than A's. Both companies have price-to-book ratios greater than one. Which of the following could explain this difference, all else equal?

• A)A uses less conservative accounting methods.
• B)A has lower expected future dividend payout ratio.
• C)A has higher expected growth.
• D)A has many more shares outstanding.

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Definitions:

Property Tax

A tax assessed on real estate by the local government, based on the property's value.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Merchandise

Goods that are bought and sold in a retail or wholesale environment.

Sales on Account

Transactions where goods or services are sold and payment is deferred, resulting in the creation of accounts receivable for the seller.