Which of the Following Statements Is CORRECT

question 96

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm has the highest price/earnings ratio of any firm in its industry, then, other things held constant, this suggests that the
• Board of directors should fire the president.
• B) If a firm has the highest market/book ratio of any firm in its industry, then, other things held constant, this suggests that the
• Board of directors should fire the president.
• C) Other things held constant, the higher a firm's expected future
• Growth rate, the lower its P/E ratio is likely to be.
• D) The higher the market/book ratio, then, other things held constant,
• The higher one would expect to find the Market Value Added (MVA).
• E) If a firm has a history of high Economic Value Added (EVA) numbers each year, and if investors expect this situation to continue, then
• Its market/book ratio and MVA are both likely to be below average.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Plant Manager's Salary

Compensation awarded to the individual responsible for overseeing the operations of a manufacturing facility or plant.

Raw Materials

Basic substances in their natural, modified, or semi-processed states, used as inputs for production.

Cost of Goods Sold LIFO

An inventory costing method where the last items placed into inventory are the first ones to be recorded as sold, which can affect the cost of goods sold and inventory valuation.