A Value Company Is Defined as One That

question 29

Multiple Choice

A value company is defined as one that:

• A)tends to have a lower average return than a growth company.
• B)tends to have higher average return than a growth company.
• C)has a high ratio of book equity to market equity.
• D)a and b.
• E)a and c.

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Definitions:

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its tangible and identifiable intangible assets.

Fair Value

The price that would be received for selling an asset or paid for transferring a liability in an orderly transaction between market participants at the measurement date.

Straight Line Amortization

A method of allocating the cost of an intangible asset evenly over its useful life.

Unrealized Profits

are profits that have been earned but not yet realized through a transaction, such as an increase in value of unsold stocks.