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:

Fixed Expenses

Costs that remain constant in total regardless of changes in the level of activity or volume of output.

Break-even Sales

The amount of revenue required to cover all fixed and variable costs associated with running a business, resulting in neither profit nor loss.

Northern Division

A geographical or organizational segment of a company responsible for operations in the northern region.

Fixed Expenses

Costs that do not change in total with the level of activity or production volume within a relevant period.