The Method of Valuing a Stock Based on the Present

question 32

Multiple Choice

The method of valuing a stock based on the present value of the future income derived from that stock is called:

• A)technical analysis.
• B)constant valuation.
• C)the basic stock valuation method.
• D)compound dividend analysis.
• E)the dividend discount model.

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, culminating in the net profit or loss for that period.

Insurance Expense

The cost incurred by an entity to obtain insurance coverage, recognized as an expense over the period the insurance protection is provided.

Retained Earnings

The portion of net income not distributed as dividends but retained by the company to reinvest in its core business or to pay debt.

Adjusted Trial Balance

An adjusted trial balance is a list of all the accounts of a company, including any adjustments, showing the final balances to be used for preparing financial statements.