Which of the Following Statements Is FALSE

question 42

Multiple Choice

Which of the following statements is FALSE?

• A)Because the enterprise value represents the entire value of the 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)Using a valuation multiple based on comparables is best viewed as a 'shortcut' to the discounted cash flow method of valuation.
• D)It is common practice to use valuation multiples based on the firm's enterprise value.

---

Definitions:

Decisions Made Quickly

A process where choices or judgments are reached in a short period of time, often to respond to immediate needs or opportunities.

Simple

Easily understood or done; presenting no difficulty.

Organizational Structure

The way in which a company or organization is organized, including the roles, responsibilities, and communication systems that govern how its activities are directed towards achieving its objectives.

Central Authority

The governing body or group at the highest level of organizational hierarchy, responsible for making major decisions.