Profit and Value of the Firm Are Two Concepts Which

question 48

Multiple Choice

Profit and value of the firm are two concepts which are:

• A)Unrelated because cash flow not profit is the main determinant of firm value
• B)Closely linked because the present value of a firm's expected future profits approximates to the market value of its securities
• C)Closely linked because dividends are paid out of profits and it is dividends that determine the market value of a firm's shares
• D)Closely linked because the market value of a firm is determined by its profits multiplied by the price-earnings ratio of its shares

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Definitions:

Payroll Bank Account

A specific bank account used by businesses exclusively for processing payroll and associated employee payments.

Employees' Net Pay

The amount of income that an employee takes home after deductions like taxes, insurance premiums, and contributions to retirement accounts have been subtracted from their gross pay.

Estimated Warranty Liability

A financial provision for the expected future costs of repairing or replacing products under warranty.

Warranty Expense

Costs that a company expects to incur under its product warranty promises for repairing or replacing defective products sold.