It Is Easier to Evaluate a Firm Using Its Financial

question 63

Multiple Choice

It is easier to evaluate a firm using its financial statements when the firm:

• A)is a conglomerate.
• B)is global in nature.
• C)uses the same accounting procedures as other firms in its industry.
• D)has a different fiscal year than other firms in its industry.
• E)tends to have one-time events such as asset sales and property acquisitions.

---

Definitions:

Shareholder's Equity

The residual interest in the assets of a corporation after deducting liabilities, often represented by stock capital and retained earnings.

Internally Generated Trademark

A trademark that has been developed through the internal efforts of a company, not acquired or purchased from a third party.

Contingent Liability

(a) A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or (b) a present obligation that arises from past events but is not recognised because: (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufficient reliability.

Business Combination Valuation

The process of estimating the value of different companies coming together through acquisitions or mergers.