The Use of Price to Book Ratios to Select Stocks

question 10

Multiple Choice

The use of price to book ratios to select stocks suggests that

• A)high price to book stocks are undervalued
• B)low price to book stocks are overvalued
• C)a stock should be purchased if it is selling near its historic high price to book ratio
• D)a stock should be purchased if it is selling near its historic low price to book ratio

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Definitions:

Continuous Replenishment Systems

A logistical strategy whereby inventory is continuously monitored and replenished to maintain optimal levels at all times.

VMI System

A collaborative strategy where suppliers take responsibility for managing inventory levels at the customer's site, often improving supply chain efficiency and reducing stocking costs.

Category Leader

Indicates a brand or product that dominates a specific category in terms of sales, customer preference, or market share.

Buyback Contracts

Agreements where a seller promises to repurchase the sold item in the future, often used in retail and supplier contracts for inventory management.