Which of the Following Statements Is False

question 60

Multiple Choice

Which of the following statements is false?

• A) The money taken in by the firm as a result of the share issue exactly offsets the dilution of the shares.
• B) Most analysts prefer to use performance measures and valuation multiples that are based on the firm's earnings before interest has been deducted.
• C) The fact that the firm's earnings per share and price-earnings ratio are affected by leverage implies that we can always reliably compare these measures across firms with different capital structures.
• D) In general, as long as the firm sells the new shares of equity at a fair price, there will be no gain or loss to shareholders associated with the equity issue itself.

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Definitions:

Annually Compounded

Pertaining to interest on investment or loans that is calculated once a year, adding to the sum each year.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, often used as an indicator of inflation.

Real Rate Of Return

The annual percentage profit earned on an investment, adjusted for changes in the price level due to inflation.

Annually Compounded

Interest on an investment or loan calculated once per year, including interest on the initial amount and all previously accumulated interest.