Which of the Following Statements Is CORRECT

question 12

Multiple Choice

Which of the following statements is CORRECT?

• A)In general, if investors regard a company as being relatively risky and/or having relatively poor growth prospects, then it will have relatively high P/E and M/B ratios.
• B)The basic earning power ratio (BEP) reflects the earning power of a firm's assets after giving consideration to financial leverage and tax effects.
• C)The "apparent," but not necessarily the "true," financial position of a company whose sales are seasonal can change dramatically during a given year, depending on the time of year when the financial statements are constructed.
• D)The market/book (M/B) ratio tells us how much investors are willing to pay for a dollar of accounting book value. In general, investors regard companies with higher M/B ratios as being more risky and/or less likely to enjoy higher future growth.
• E)It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only if all the firms being compared have the same proportion of fixed assets to total assets.

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, allowing for a more accurate comparison of actual to budgeted expenses.

Tenant-Days

A measure used in property management to calculate the number of days a property is occupied by tenants over a certain period.

Administrative Expenses

Overheads and expenses associated with the general operation of a business.

Client-Visits

Refers to the occasions on which a service provider or salesperson visits clients at their location to build relationships, offer support, or close sales.