Each of the Following Is a Reason Why the Valuation

question 86

Multiple Choice

Each of the following is a reason why the valuation of common stock is considerably more complicated than that of bonds or preferred stocks EXCEPT _____.

• A) the returns can take two forms: annual cash payments and price appreciation
• B) the cash flows from common stocks are generally more uncertain than the cash flows from other types of securities
• C) the returns from common stocks are generally larger and more certain than the returns from bonds and preferred stocks
• D) None of these are correct

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Definitions:

Distributorships

Business arrangements where an individual or company is given the right to sell and distribute a manufacturer's products within a particular territory.

Franchises

A type of business model that allows an individual or group to operate a business using the branding and systems of an established company.

Franchisor

The owner of the trade name or trademark in a franchise.

Non-Exclusive Territory

A designated area where more than one entity is granted rights or privileges, such as sales or distribution, by an agreement.