Which of the Following Statements Is FALSE

question 54

Multiple Choice

Which of the following statements is FALSE?

• A)Even two firms in the same industry selling the same types of products,while similar in many respects,are likely to be of different size or scale.
• B)In the method of comparables,we estimate the value of the firm based on the value of other,comparable firms or investments that we expect will generate very similar cash flows in the future.
• C)Consider the case of a new firm that is identical to an existing publicly traded company.If these firms will generate identical cash flows,the Law of One Price implies that we can use the value of the existing company to determine the value of the new firm.
• D)A valuation multiple is a ratio of some measure of the firm's scale to the value of the firm.

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Definitions:

Liquidity

The ease with which an asset, or security, can be converted into ready cash without affecting its market price.

Expenses Incurred

Costs that have been realized during the course of a business operation or activity.

Net Income

The amount of money remaining after all operating expenses, taxes, and interest have been deducted from total revenue.

Sales

The process of exchanging a product or service for monetary value, typically in a business setting.