When Considering the Determinants of the Price-To-Book Ratio (PB) Which

question 14

Multiple Choice

When considering the determinants of the price-to-book ratio (PB) which of the following is correct?

I. All other things being equal, the greater a company's return on common stockholders' equity, the greater the PB ratio.
II. All other things being equal, the greater a company's cost of equity, the greater the PB ratio.
III. If a company's return on common stockholders' equity equals its cost of equity, the PB ratio should equal 1.
IV. The greater a company's current earnings the higher the PB ratio.

• A)I, III, and IV
• B)I and III
• C)II and IV
• D)I and II

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Definitions:

Crutch Tips

Rubber ends attached to the bottom of crutches to prevent slipping and provide stability.

Flexion

The action of bending a limb or joint, reducing the angle between the bones of the limb at the joint.

Axilla

The area on the human body directly under the joint where the arm connects to the shoulder, commonly known as the armpit.

Three-Point Crutch Gait

A method of walking or moving using crutches where two crutches and the injured leg form three points of contact with the ground.