62 457
Assignments Done
99,1%
Successfully Done
In June 2018

Answer to Question #11899 in Other Economics for Vera Ousley

Question #11899
Which of the following statements is CORRECT?
a. Typically, a firm’s DPS should exceed its EPS.
b. Typically, a firm’s EBIT should exceed its EBITDA.
c. If a firm is more profitable than average (e.g., Google), we would normally expect to see its stock price exceed its book value per share.
d. If a firm is more profitable than most other firms, we would normally expect to see its book value per share exceed its stock price, especially after several years of high inflation.
e. The more depreciation a firm has in a given year, the higher its EPS, other things held constant.

Expert's answer
The CORRECT answer is C. When firm's stock price exceeds its book value per
share then firm's assessts are divided the number of shares outstanding shows
that the stock is overvalued. In case the stock is perfectly fairly valued, the
stock price equals the book value per share. A stock selling below book, if
there are no negative issues surrounding the company, is considered a bargain.
There can be legitimate reasons for a stock selling above book value; if the
company is growing quickly and the price is trending high prior to an earnings
report, for example.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

Submit
Privacy policy Terms and Conditions