Vinnie's Motors of Winnipeg Has a Market-To-Book Ratio of 3

question 290

Multiple Choice

Vinnie's Motors of Winnipeg has a market-to-book ratio of 3. The book value per share is $4.00. This means that a $1 increase in the book value per share will:

• A) Cause the accountants to increase the equity of the firm by an additional $2.
• B) Increase the market price per share by $1.
• C) Increase the market price per share by $12.
• D) Tend to cause the market price per share to rise.
• E) Only affect book values but not market values.

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Definitions:

Inventory Level

The number of units of products or materials that are kept in stock by a business.

Period Cost

Costs that are taken directly to the income statement as an expense in the period in which they are incurred, not directly tied to the production of inventory.

Fixed Manufacturing Cost

Costs that remain constant regardless of production volume, including fixed overheads like lease payments, wages for full-time staff, and reduction in value of manufacturing machinery.

Long-Term Prices

Prices or rates expected to remain stable or predictable over an extended period, often relating to commodities or financial assets.