Which of the Following Statements Is FALSE

question 31

Multiple Choice

Which of the following statements is FALSE?

• A)The fact that a firm has an exceptional management team,has developed an efficient manufacturing process,or has just secured a patient on a new technology is ignored when we apply a valuation multiple.
• B)Valuation multiples have the advantage that they allow us to incorporate specific information about the firm's cost of capital or future growth.
• C)For firms with substantial tangible assets,the ratio of price to book value of equity per share is sometimes used.
• D)Using multiples will not help us determine if an entire industry is overvalued.

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Definitions:

Average Collection Period

The expected time a business collects payments from its customers for goods or services it has sold on credit terms.

Average Investment

The mean amount invested in certain assets or projects over a specific time period, aiming to gauge investment activity.

Net Working Capital

The gap between what a business owns in short-term assets versus what it owes in short-term liabilities.

Net Fixed Assets

The value of a company’s property, plant, and equipment (PP&E) minus its accumulated depreciation, indicating the net book value of its fixed assets.