The Weights Used to Determine the Relative Importance of the Firm's

question 37

Multiple Choice

The weights used to determine the relative importance of the firm's sources of capital should reflect

• A)book values in accord with generally accepted accounting principles.
• B)current market values for bonds,ordinary shares,and ordinary shares and book values for retained earnings.
• C)current market values.
• D)subjective adjustments for firm risk.

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Definitions:

Price-Earnings Ratio

A valuation metric for companies, calculated by dividing the current market price of a stock by its earnings per share.

Discontinued Operations

Components of a company that have been sold or terminated, reported separately in financial statements for clarity.

Continuing Operations

Refers to the parts of a business expected to continue operating and generating revenue over the long term, excluding any discontinued operations.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's earnings.