A Firm Has a Market to Book Value Ratio That

question 43

Multiple Choice

A firm has a market to book value ratio that is equivalent to the industry average and an ROE that is less than the industry average,which implies _______.

• A) the firm has a higher P/E ratio than other firms in the industry
• B) the firm is more likely to avoid insolvency in the short run than other firms in the industry
• C) the firm is more profitable than other firms in the industry
• D) the firm is utilizing its assets more efficiently than other firms in the industry
• E) none of these

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Definitions:

Overhead Assigned

The allocation of indirect costs to specific jobs or production activities based on a predetermined formula or method.

Traditional Costing

An accounting method that applies indirect costs to products based on a predetermined overhead rate, typically simpler than activity-based costing.

Activity-Based Costing

A costing methodology that assigns the costs of resources to products or services based on activities and processes involved in their production.

Traditional Costing Method

A cost accounting method that assigns overhead costs to products based on a predetermined overhead rate.