Which of the Following Statements Is FALSE

question 33

Multiple Choice

Which of the following statements is FALSE?

• A) As the enterprise value represents the entire value of a 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 price-earnings ratio by using either trailing earnings or forward earnings with the resulting ratio called the trailing price-earnings or forward price-earnings.
• C) It is common practice to use valuation multiples based on a 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.

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Definitions:

Instrument

A formal legal document that serves as evidence of a fact, act, or obligation, such as a deed, will, or contract.

Insane

A term describing severe mental illness or insanity, legally signifying inability to understand or control one's actions.

Checks

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer.

Void

Having no legal force or effect; not legally binding or enforceable.