Which One of the Following Computes Value Based on Annual

question 78

Multiple Choice

Which one of the following computes value based on annual earnings?

• A)Discounted cash flow method.
• B)Liquidity method.
• C)Multiples-based method.
• D)Profitability method.
• E)Market value method.

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Definitions:

Adverse Selection

A situation where asymmetric information leads to the selection of poor risks or unwanted results, commonly discussed in insurance markets and financial services.

Moral Hazard

The situation where one party is more likely to take risks because the negative consequences of those risks will be felt by another party.

Asymmetric Information

Occurs when one party in a transaction has more or superior information compared to another, affecting decision-making.

Moral Hazard

A situation in economics and finance where one party takes more risks because another party bears the cost of those risks.