A Firm Has a ROE Equal to the Industry Average

question 80

Multiple Choice

A firm has a ROE equal to the industry average but its price to book ratio is below the industry average.You know that the firm's _________.

• A) earnings yield is above the industry average
• B) P/E ratio is above the industry average
• C) dividend payout ratio is too high
• D) interest burden must be below the industry average

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Definitions:

Cost Accounting

A method of accounting that focuses on calculating, recording, and analyzing all costs incurred by a business in producing goods or services.

Open-Book Accounting

A management approach where detailed financial information is shared with employees to help them understand the financial performance and make better decisions.

Cash Flow

The total amount of money being transferred in and out of a business, representing its financial health.

Receipts

Documents that acknowledge the receiving of goods, services, or payments, serving as proof of transaction or payment.