Which of the Following Statements Is FALSE

question 2

Multiple Choice

Which of the following statements is FALSE?

• A) Even two firms in the same industry selling the same types of products, while similar in many respects, are likely to be of different size or scale.
• B) In the method of comparables, we estimate the value of a firm based on the value of other, comparable firms or investments that we expect will generate very similar cash flows in the future.
• C) Consider the case of a new firm that is identical to an existing publicly traded company. If these firms will generate identical cash flows, the Law of One Price implies that we can use the value of the existing company to determine the value of the new firm.
• D) A valuation multiple is a ratio of some measure of a firm's scale to the value of the firm.

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Definitions:

Reportable Segments

Components or segments of a business that must be separately disclosed in financial reports because they represent a significant portion of the business's operations or financial outcomes.

Operating Segments

Components of a business for which separate financial information is available and is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and assess performance.

Sales

Transactions where goods or services are exchanged for money, representing a critical source of revenue for businesses.

Segmental Financial Reporting

The practice of reporting financial data for different branches, divisions, or segments of a company to provide insights into individual performance.