If Market Values of Equity Exceed Book Values of Equity,then

question 24

Multiple Choice

If market values of equity exceed book values of equity,then:

• A) equity has been depreciated too rapidly.
• B) the firm uses accrual-based accounting.
• C) profit potential is expected to be attractive.
• D) the firm is holding too much cash.

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Definitions:

Risk Class

A categorization that reflects the level of risk associated with an investment, used to align investments with an investor's risk tolerance.

Preferred Stock

A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock, often receiving dividends before common shareholders.

Dividend Yield

A ratio in finance that reveals the yearly dividend payment of a company against its share price.

Growth Rate

The rate at which a company's sales, earnings, or other chosen financial indicator increases over a period of time.