Which Method of Determining a Firm's Net Worth Divides the Market

question 46

Multiple Choice

Which method of determining a firm's net worth divides the market price of the firm's stock by the annual earnings per share, and multiplies this number by the firm's average net income for the past five years?

• A) Debt/Equity Method
• B) Current Ratio Method
• C) Price-Earnings Ratio Method
• D) Long-term Asset Method
• E) Outstanding Shares Method

---

Definitions:

Supplies Expense

An accounting term referring to the cost of supplies consumed or used by a business within a reporting period.

Worksheet

An accounting tool used for planning and preparing financial statements, typically including trial balance, adjusting entries, adjusted trial balance, and financial statements.

Depreciation Expense

The systematic allocation of the depreciable amount of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Salaries and Wages Expense

Salaries and wages expense refers to the total amount paid by a business for employee services during a specific period, including salaries, hourly wages, and bonuses.