Where a Market Has Both a Bid and an Ask

question 21

Multiple Choice

Where a market has both a bid and an ask process, the price used in measuring fair value is:

• A) the average of the bid-ask prices over a 3 month period.
• B) the most representative price for the transaction.
• C) the ask price.
• D) the bid price.

---

Definitions:

Debt to Equity

A financial metric showing the comparative amount of debt and shareholders' equity utilized to fund a company's assets.

Price/Earnings

A valuation ratio of a company's current share price compared to its per-share earnings, used to assess if a stock is over or undervalued.

Ratio Analysis

A technique of analyzing the strength of a company by forming (financial) ratios out of sets of numbers from the financial statements. Ratios are compared with the competition, recent history, and the firm’s plan to assess the quality of its performance.

Stable Company

Refers to a firm with consistent performance, low volatility in its stock price, and predictable financial returns, making it a less risky investment.