Which of the Following Statements Is FALSE

question 16

Multiple Choice

Which of the following statements is FALSE?

• A)Because the enterprise value represents the entire value of the firm before the firm pays its debt,to form an appropriate multiple,we divide it by a measure of earnings or cash flows after interest payments are made.
• B)We can compute a firm's P/E ratio by using either trailing earnings or forward earnings with the resulting ratio called the trailing P/E or forward P/E.
• C)It is common practice to use valuation multiples based on the firm's enterprise value.
• D)Using a valuation multiple based on comparables is best viewed as a "shortcut" to the discounted cash flow method of valuation.

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Definitions:

DRG System

A system used in healthcare to classify hospital cases into groups according to diagnosis, treatment, and length of stay, for the purpose of payment and data analysis.

Labor Costs

The total sum of all wages paid to employees, as well as the costs of employee benefits and payroll taxes incurred by an employer.

Nonlabor Costs

Expenses related to the operations of a business or project that do not include direct costs of labor, such as materials or overhead.

Complication

An unexpected illness or other condition that develops as a result of a procedure, service, or treatment provided during the patient’s hospital stay.