A Major Reason Why Many Companies Have the High Valuation

question 21

Multiple Choice

A major reason why many companies have the high valuation ratios (ratio of stock market value to balance sheet net asset value) is:

• A)Stock market irrationality which results in some companies becoming overvalued
• B)The undervaluation of intangible resources on companies' balance sheets
• C)Stock market doubts over the valuation of financial assets by companies and their auditors
• D)The rise of intellectual property valuation as a result of recent patent litigation.

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Definitions:

Ether

Organic compounds that are defined by having an oxygen atom bonded to two alkyl or aryl groups.

Carboxylic Acid

Organic acids characterized by the presence of at least one carboxyl group, which consists of a carbon atom double-bonded to an oxygen atom and single-bonded to a hydroxyl group.

Alcohol

A compound containing one or more hydroxyl (OH) groups attached to a carbon atom.

Ester

Organic compounds formed by the reaction of an acid (usually carboxylic acid) with an alcohol, characterized by the functional group -COO-.