Which of the Following Statements Is FALSE

question 54

Multiple Choice

Which of the following statements is FALSE?

• A)Even two firms in the same industry selling the same types of products,while similar in many respects,are likely to be of different size or scale.
• B)In the method of comparables,we estimate the value of the firm based on the value of other,comparable firms or investments that we expect will generate very similar cash flows in the future.
• C)Consider the case of a new firm that is identical to an existing publicly traded company.If these firms will generate identical cash flows,the Law of One Price implies that we can use the value of the existing company to determine the value of the new firm.
• D)A valuation multiple is a ratio of some measure of the firm's scale to the value of the firm.

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Definitions:

Notes Payable

A written promise to pay a specified amount of money, along with interest, by a certain date.

Interest Expense

Expenses that a company faces for using borrowed capital, usually shown on the profit and loss statement.

Owner's Equity

The residual interest in the assets of an entity that remains after deducting its liabilities. It represents the ownership interest of the shareholders in a company.

Total Liabilities

The sum of all financial obligations or debts a company owes, including loans, accounts payable, mortgages, and any other monies due to external parties.