Which of the Following Statements Is False Concerning the Use

question 295

Multiple Choice

Which of the following statements is false concerning the use of accounting data versus market value data?

• A) The primary reason for using accounting data is the lack of readily available market value information.
• B) Whenever market value information is available, it should be used instead of accounting data.
• C) If market value and accounting data conflict, the accounting data should be given precedence.
• D) If a firm has only current assets and current liabilities, book values will likely be reasonable approximations of market values.
• E) Little direct market value information exists for privately held and not-for-profit businesses.

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Definitions:

Salvage Value

The estimated residual value of an asset at the end of its useful life, used in accounting for depreciation calculations.

Estimating Cash Flows

The process of forecasting the amounts of cash that will be received and spent by a business in a future period.

Replacement Projects

Investments undertaken to replace old or damaged assets in order to maintain operational efficiency.

Perpetuity Formulas

Mathematical equations used to calculate the value of payments or cash flows that continue indefinitely.