Which of the Following Statements Incorrectly Describes the Relationship Between

question 59

Multiple Choice

Which of the following statements incorrectly describes the relationship between a company's book value per share and its market price per share?

• A)If the book value per share is below the market value per share,then shareholders are paying for the future earnings power of the company.
• B)If a company has unrecorded assets or appreciated assets,the market value per share is likely to be greater than the book value per share.
• C)Since the book value per share is based on historical costs,the book value per share can never be greater than the market price per share.
• D)Use of the book value per share can be highly questionable for many companies,since it is based on balance sheet amounts that in turn are based upon historical costs.
• E)If the market value of a company's assets is much greater than the assets' historical costs,then the market price per share will likely be greater than the book value per share.

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Definitions:

Adolescence

A developmental transition between childhood and adulthood involving significant physical, emotional, and psychological changes.

Young Adulthood

The stage of life following adolescence, roughly between the ages of 20 and 40, characterized by the pursuit of independence, relationships, and career development.

Revolving Door

A term often used to describe a situation where people or positions are frequently replaced or changed.

Emerging Adult

A phase of development spanning from late teens through twenties, characterized by exploration, instability, and self-focus in the transition to adulthood.