Why Must Care Be Taken When Comparing a Firm's Share

question 67

Multiple Choice

Why must care be taken when comparing a firm's share price to its operating income?

• A)Both share price and operating income are related to the whole firm.
• B)Share price is a quantity related to the entire firm,while operating income is an amount that is related solely to equity holders.
• C)Both share price and operating income are related solely to equity holders.
• D)Share price is a quantity related to equity holders,while operating income is an amount that is related to the whole firm.
• E)Share price is a quantity related to the enterprise value of the firm,while operating income is related to the equity holders.

---

Definitions:

Goal

A specific, measurable, attainable, relevant, and time-bound objective that individuals or organizations aim to achieve.

Process

Process refers to a series of actions or steps taken to achieve a particular end, often related to procedures and methodologies in various disciplines.

Moral Hazard Insurance

Situations in insurance where the existence of insurance coverage can lead to riskier behavior by the insured, as the consequences of that behavior are partially absorbed by the insurer.

Disability Insurance

A type of insurance that provides financial support to a person who is unable to work because of a disability.