The method of comparators can be applied using the ratio of operating income to revenue as a basis for valuation. If operating income is negative this means operating income cannot be used to create a value multiple the value of the business is negative the value of the business is zero the business cannot be sold
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- A positive price-to-book ratio indicates something is wrong with a company's use of its assets. True FalseTrue or False: All else being equal, a decrease in a company's profit margin will result in an increase in its return on assets. Select one: True FalseWhich of the followings is/are drawbacks associated with valuation by comparables with P/S or P/E? Earnings can be negative Company may have no earnings at all Sales may not be representative if products are different Sales can be manipulated i, ii and iii only i and iii only i and ii all
- Explain how is it possible for a business to earn a gross profit but still incur a net loss.If a company is using the lower-of-cost-or-market rule and a write-down is required, how will that write-down affect the company's financial statements? Multiple Choice Total assets will decrease. Net income will increase. Net income and total assets will both decrease. Gross margin will decrease.Compare and contrast the net income margins of both Company A and B. Do you think the company with the lower net income margin is in absolute financial distress? Explain.
- Gross profit will result if: O Sales revenues are greater than operating expenses. Operating expenses are greater than cost of goods sold. Sales revenues are greater than cost of goods sold. O Operating expenses are less than net income.Which of the following terms does not mean the same as the others? a. Bottom line b. Profit from operations c. Gross profit d. Operating profitWhich of the following statements about accounting income and economic income is (are) correct? I. Accounting income ignores many unrealized gains/losses of assets and liabilities, but economic income fully recognizes unrealized gains/losses. II. Accounting income does not consider all the costs (e.g., opportunity costs), whereas economic income account for all types of costs. III. Income and capital gains/losses are treated different in the calculation of accounting income, while they are treated the same in the calculation of economic income. Group of answer choices a.I and II b. I and III c. II and III d. I, II and III
- Which two economic concepts are fundamental to the relevance of fair values to accounting? i. The Efficient Markets Hypothesis ii. Supply and Demand iii. Economic Rationalism iv. Marginal Utility Which of the following is NOT a transaction cost that should be considered in the calculation of fair value? a. Costs associated with marketing the item. b. Transport costs. c. Agent's selling fees. d. None of the above, i.e. they are all transaction costs.What is the validity of the following statements? (1) Modern business is characterised by a low level of indirect cost relative to direct cost. (2) Modern business is characterised by a capital intensive production. A B C D OO A Statement (1) True True False False (2) True False True FalseIncome from operations will always result if revenues exceed operating expenses. revenues exceed cost of goods sold. the cost of goods sold exceeds operating expenses. gross profit exceeds operating expenses.