Which of the Following Statements Is CORRECT

question 80

Multiple Choice

Which of the following statements is CORRECT?

• A) In general,if investors regard a company as relatively risky and/or having relatively poor growth prospects,then it will have relatively high P/E and M/B ratios.
• B) The basic earning power ratio (BEP)reflects the earning power of a firm's assets after giving consideration to financial leverage and tax effects.
• C) The "apparent," but not necessarily the "true," financial position of a company whose sales are seasonal can change dramatically during a given year,depending on the time of year when the financial statements are constructed.
• D) The market/book (M/B)ratio tells us how much investors are willing to pay for a dollar of accounting book value.In general,investors regard companies with higher M/B ratios as more risky and/or less likely to enjoy higher future growth.
• E) It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only if all the firms being compared have the same proportion of fixed assets to total assets.

---

Definitions:

Hernia

The protrusion of an organ through the wall that usually contains it, such as a hiatal or inguinal hernia.

Muscle

Tissue in the body composed of fibers capable of contracting to produce movement or maintain the posture of the body.

Meningitis

An inflammation of the protective membranes covering the brain and spinal cord, potentially caused by infection (viral, bacterial, or fungal).

Spinal Cord

The long, thin, tubular structure composed of nervous tissue that extends from the brainstem down the back, enabling communication between the brain and the body.