Which of the Following Statements Is CORRECT

question 80

Multiple Choice

Which of the following statements is CORRECT?

• A) if a firm has the highest price/earnings ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
• B) if a firm has the highest market/book ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
• C) other things held constant, the higher a firm's expected future growth rate, the lower its p/e ratio is likely to be.
• D) the higher the market/book ratio, then, other things held constant, the higher one would expect to find the market value added (mva).
• E) if a firm has a history of high economic value added (eva) numbers each year, and if investors expect this situation to continue, then its market/book ratio and mva are both likely to be below average.

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Definitions:

Period-End

Marks the conclusion of an accounting period, at which point various accounting entries are finalized, and reports are prepared.

Current Asset Account

An account on the balance sheet representing the value of assets that are expected to be converted into cash, sold, or consumed within a year or the operating cycle, whichever is longer.

Inventory Returns Estimated

An accounting estimate of the goods that will be returned by customers and subtracted from sales revenue.

Period-End Adjusting Entry

Journal entries made at the end of an accounting period to update the balances of certain accounts and ensure compliance with the accrual basis of accounting.