Companies' "Book Values" Are Generally Much Less Than Their Stock

question 19

Multiple Choice

Companies' "book values" are generally much less than their stock market valuations because

• A)auditors tend to err on the conservative side.
• B)accountants are generally required by accounting standards to ignore the value of brands and all other reputational assets.
• C)to be on the safe side accountants tend to undervalue brand values.
• D)accountants and marketing experts have different methods of valuing brands.

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Definitions:

Self-Fulfilling Prophecy

A forecast that becomes a reality because of the mutual influence between how one thinks and acts, leading to its own fulfillment.

Postdecisional Dissonance

The psychological discomfort one feels after making a difficult decision, often leading to regret or rationalization of the choice.

Insufficient Justification Effect

A phenomenon where individuals modify their attitudes or beliefs to align with their actions, especially when those actions lack adequate external justification.

Fundamental Attribution Error

The tendency to overemphasize internal characteristics for someone else's behavior and underemphasize situational factors.