A Problem with Valuing a Target Using P/E Ratios Is

question 50

Multiple Choice

A problem with valuing a target using P/E ratios is:

• A)the assumption that risk differences between the bidder and target can be captured in the discount rate.
• B)the assumption that 'future maintainable earnings' can represent a company's future earnings.
• C)the assumption that the risk of the target can be fully captured in the discount rate.
• D)all of the given options.

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Definitions:

Adequate Records

Maintaining sufficiently detailed financial records that reflect the company's transactions and financial condition.

Technological Controls

Systems and procedures implemented to monitor, manage, and secure an organization's technology infrastructure and data.

Independent Reviews

Assessments conducted by outside parties to evaluate the accuracy, fairness, or compliance of processes or financial records.

Bank Reconciliation

The process of matching and comparing transactions recorded in an entity's accounting records against those listed on a bank statement.