Which of the Following Is More Likely to Be Correct

question 56

Multiple Choice

Which of the following is more likely to be correct if market value of equity is less than book value of equity?

• A) Investors anticipate excellent earning potential.
• B) Investors anticipate low earning potential.
• C) Assets have been fully depreciated.
• D) The company is bankrupt.

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Definitions:

Net Income

The total earnings of a company after all expenses and taxes have been deducted from total revenue.

ROA

Return on Assets, a financial ratio indicating the profitability of a company relative to its total assets.

ROA

Return on Assets, an indicator of how profitable a company is relative to its total assets, illustrating how efficiently a company is using its assets to generate earnings.

DSO

Days Sales Outstanding refers to the average period a company requires to receive payment following a sale.