Firms a and B Have the Same Number of Shares

question 13

Multiple Choice

Firms A and B have the same number of shares outstanding.Relative to firm A,firm B is less capital intensive,has a lower debt to asset ratio and pays a larger proportion of its earnings as dividends.On the basis of these facts,would you say that:

• A) Firm A offers a higher level of risk to shareholders than firm B.
• B) Firm A offers a lower level of profitability than firm B.
• C) Firm A has more fixed assets as a proportion of its total assets than firm B.
• D) Firm A book value per share is smaller than that of firm B.

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Definitions:

Needs And Wants

Basic requirements for survival (needs) contrasted with desires that can be fulfilled through purchasing goods and services (wants).

Managerial Accounting

Managerial accounting involves the processes of identifying, analyzing, recording, and presenting financial information that can be used internally by managers for planning, decision-making, and operational control.

Financial Accounting

The field of accounting focused on the summary, analysis, and reporting of financial transactions relating to a business, following standardized guidelines.

Raw Materials Inventory

The total cost of all components that are intended to be used in the production of a product but have not yet been used.