The Equation for the Value of a Company with the Earnings

question 20

Multiple Choice

The equation for the value of a company with the earnings capitalization method is:

• A) Company Value = Gross Revenue ÷ Book Value
• B) Company Value = Net Income ÷ Capitalization Rate
• C) Company Value = Net Income × Market price of stocks
• D) Company Value = Sum of Cash Flow for the past five years
• E) Company Value = Price of one share × number of shares

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Definitions:

Reminder

A tool or alert designed to prompt an individual to recall or take action on a particular task or event.

Transaction Types

The various categories of financial activities, such as sales, purchases, payments, and receipts, recorded in accounting.

Banking And Credit Card

Financial services and products that involve managing checking and savings accounts, as well as issuing and servicing credit card accounts.

Vendors And Expenses

Refers to the companies or individuals from whom goods or services are purchased (vendors) and the costs incurred in the operation of a business (expenses).