Which of the Following Statements Concerning the Valuation of Firms

question 41

Multiple Choice

Which of the following statements concerning the valuation of firms using the method of comparables is FALSE?

• A) If two different firms generate identical cash flows, the Law of One Price will imply that both firms have the same value.
• B) Comparables adjust for scale differences when valuing similar firms.
• C) Valuation multiples take into account differences in the risk and future growth between the firms being compared.
• D) Two firms that sell very similar products or offer very similar services will have different values if they are of different sizes.

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Definitions:

False Advertising

The act of making untrue, misleading, or deceptive statements in advertisements about products or services.

Federal Commerce Commission

Likely refers to the Federal Trade Commission (FTC), a U.S. federal agency tasked with protecting consumer rights and ensuring a strong competitive market by enforcing antitrust and consumer protection laws.

Unfair Trade Practices

Business practices that mislead, deceive, or are unethical, potentially harming consumers or competitors.

Deceptive Trade Practices

Activities by businesses that mislead consumers or distort the truth about the products or services being offered.