When Tobin's Q Is Greater Than One,________

question 12

Multiple Choice

When Tobin's q is greater than one,________.

• A)a unit of a firm's stock (equity)is worth more than a unit of the firm's capital
• B)a new unit of capital has more value than a new unit of stock (equity)
• C)installed capital is worth less than new capital
• D)a unit of capital that a firm owns has more value than a unit it might buy

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Definitions:

Net Operating Income

is the total profit of a business after deducting operating expenses but before subtracting taxes and interest.

Contribution Margin Ratio

A metric that reveals the percentage of sales revenue that exceeds variable costs and contributes to covering fixed costs and generating profit.

Margin of Safety

Represents the extent to which sales can drop before a business reaches its break-even point.

Units

Units refer to the individual items or quantities that are produced, sold, or held in inventory.