Which of the Following Statements Is FALSE

question 16

Multiple Choice

Which of the following statements is FALSE?

• A)Because the enterprise value represents the entire value of the firm before the firm pays its debt,to form an appropriate multiple,we divide it by a measure of earnings or cash flows after interest payments are made.
• B)We can compute a firm's P/E ratio by using either trailing earnings or forward earnings with the resulting ratio called the trailing P/E or forward P/E.
• C)It is common practice to use valuation multiples based on the firm's enterprise value.
• D)Using a valuation multiple based on comparables is best viewed as a "shortcut" to the discounted cash flow method of valuation.

---

Definitions:

Scatterplot

A type of graph used in statistics to visually display and compare two variables for a set of data, showing how much one variable is affected by another.

Two-Way Table

A table that displays data about two categorical variables; used to explore the relationship between the two variables.

Scatterplot Strength

Indicative of the degree of correlation between two variables represented in a scatterplot, showing how closely the data points fit a trend line.

Curve Following

The practice of tracing the path or line that best fits the pattern of a dataset, often used in trend analysis.