Which of the Following Statements Is FALSE

question 39

Multiple Choice

Which of the following statements is FALSE?

• A)We cannot use the general dividend-discount model to value the stock of a firm with rapid or changing growth.
• B)As firms mature,their growth slows to rates more typical of established companies.
• C)The dividend-discount model values the stock based on a forecast of the future dividends paid to shareholders.
• D)The simplest forecast for the firm's future dividends states that they will grow at a constant rate,i.e. ,forever.

---

Definitions:

Inventory Turnover

A measure of how quickly a company sells its stock of goods in a period, calculated by dividing the cost of goods sold by the average inventory level.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by shareholders' equity.

Debt-to-equity Ratio

The ratio that demonstrates the comparative financing from shareholders' equity and debt for a company's assets.

Times Interest Earned Ratio

The Times Interest Earned Ratio measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.