Which of the Following Is Correct with Regard to Market

question 199

Multiple Choice

Which of the following is correct with regard to market capitalization?

• A) There is considerable stability in the market capitalization of companies from year to year.
• B) Market capitalization is computed by dividing owners' equity by the number of outstanding shares.
• C) In Canada, most of the companies with the highest market capitalization are financial institutions or resource companies.
• D) There is general agreement that market capitalization really doesn't tell us very much about the real value of a company.
• E) All of these are correct.

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Definitions:

Basic Research

Fundamental research aimed at gaining a comprehensive understanding of basic principles and facts, rather than immediate commercial objectives.

Immediate Payoff

A benefit or reward that is received right away, without delay.

Society

A group of individuals living together in a more or less ordered community, sharing common traditions, institutions, and values.

Stock Split

Current shareholders are given some number (or fraction) of shares for each share owned. Thus, in a three-for-one split, each shareholder would receive three new shares in exchange for each old share, thereby tripling the number of shares outstanding. Stock splits usually occur when the stock price is outside of the optimal trading range.