Which of the Following Statements Is FALSE

question 82

Multiple Choice

Which of the following statements is FALSE?

• A)We should 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,g,forever.

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Definitions:

Return On Equity

A financial ratio indicating the profitability of a company in relation to shareholders' equity, showing how effectively a company uses investments to generate earnings growth.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, showing the company's financial position.

Income Statement

A statement that outlines the financial activities, including incoming revenue, outgoing expenses, and total net profit, of an organization within a specific time.

Return On Equity

A financial ratio that measures the profitability of a company in generating profit from its shareholders' equity.