How Is the Value of Equity Determined for a Market

question 69

Multiple Choice

How is the value of equity determined for a market value balance sheet?

• A)Summation of all the sale prices for shares of stock sold to shareholders
• B)Summation of the market value of the firm's outstanding equity and debt securities
• C)Summation of all shareholder investments in the firm plus the value of any retained earnings
• D)Number of shares outstanding multiplied by the current price per share
• E)Number of shares outstanding multiplied by the current price per share minus the amount of debt outstanding

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales volume.

Fixed Costs

Fixed expenses unaffected by production or sales volumes, like rent, salaries, and insurance premiums.

Relevant Range

The range of activity within which the assumptions about variable and fixed cost behavior are valid.

Cost Behavior

The study of how specific costs change in relation to changes in a company's level of activity or volume of output.