Quiz Ch 04 – T/F Market Value Added Calculation
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: Market value added is the result of subtracting a firm’s book value from the market value of its equity.
True or false: Market value added is the result of subtracting a firm’s book value from the market value of its equity.
True or false: Market value added and economic value added are synonymous terms.
True or false: Market value ratios offer management insights into how investors perceive the firm’s historical performance and, more importantly, its future potential.
True or false: In the majority of cases, the market value of firms tends to surpass their book value.
True or false: The majority of exchange-traded funds are passively managed.
True or false: Typically, it’s more favorable to maintain a low inventory turnover ratio than a high one. A lower ratio indicates that the firm holds an ample inventory compared to sales, preventing sales loss due to inventory shortages.
True or false: The price/earnings (P/E) ratio indicates the price investors are willing to pay for one dollar of present earnings. Typically, investors consider companies with higher P/E ratios to be less risky and/or have greater potential for future growth.
True or false: Securities belonging to the same risk class are priced to yield the same expected return.
True or false: Assuming uniform financing policies, comparable risks, equal capital access, and operating in competitive markets, firms encountering distinct operating conditions (such as grocery stores versus airlines) are likely to exhibit a trend where high-profit-margin firms have elevated asset turnover ratios and low-profit-margin firms possess reduced turnover ratios.
True or false: Profitability ratios depict the integrated outcomes of liquidity, asset management, and debt management on a firm’s operational outcomes.