The Value of a Share of Common Equity Should Equal

question 42

Short Answer

The value of a share of common equity should equal the present value of the _____________________________________________ the shareholders will receive.

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Definitions:

Cash Flows

The net amount of cash being transferred into and out of a business.

Operating Activities

The principal revenue-producing activities of the entity and other activities that are not investing or financing activities.

Bad Debts Expense

Represents the recognition of accounts receivable that are not expected to be collected.

Non-Current Assets

Assets owned by a company not expected to be converted to cash or used within the business's operating cycle or fiscal year.