Companies Value-To-Book and Market-To-Book Ratios May Differ Due to Accounting

question 58

Multiple Choice

Companies value-to-book and market-to-book ratios may differ due to accounting reasons.An example of an accounting reason that would create a difference is:

• A) accelerated methods of depreciation.
• B) investments in successful research and development programs that are expensed according to conservative accounting principles.
• C) using LIFO versus FIFO for inventory.
• D) high operating leverage.

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Definitions:

Relationship Between Variables

The way in which two or more variables interact with each other, indicating a correlation or causal connection.

Nature

The inherent qualities or characteristics of something or the physical world collectively.

Line

A basic geometric concept representing the straight path connecting two points and extending infinitely in both directions.

Negative Relationship

A type of correlation where one variable increases as the other variable decreases, indicating an inverse relationship between the two.