Companies Value-To-Book and Market-To-Book Ratios May Differ Due to Accounting

question 58

Multiple Choice

Companies value-to-book and market-to-book ratios may differ due to accounting reasons.An example of an accounting reason that would create a difference is:

• A) accelerated methods of depreciation.
• B) investments in successful research and development programs that are expensed according to conservative accounting principles.
• C) using LIFO versus FIFO for inventory.
• D) high operating leverage.

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Definitions:

Pollution Reduction

Initiatives or approaches focused on reducing the level of pollutants emitted into the surroundings.

Pollution Permits

Certificates that allow entities to emit a certain amount of pollutants; can be bought, sold, or traded in a regulatory market.

Marginal Benefits

The additional enjoyment or advantage obtained from using one more unit of a good or service.

Pollution Emissions

The release of pollutants, harmful chemicals, or substances into the environment, typically as a byproduct of industrial activity or transportation.