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

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

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 7MCQ: The key difference between residual income and EVA is that EVA a. uses the actual cost of capital...

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Similar questions

When analyzing an income statement, which of the following statements is true? Multiple Choice Depreciation is a non cash item on the income statement. Generally accepted accounting principles (GAAP) require that income is reported when it is earned, even though no cash flow may have occured. Jhy Companies try ot make costs variable with sales as much as possible
True 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 False
A positive price-to-book ratio indicates something is wrong with a company's use of its assets. True False
Which 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.
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.
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.
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 profit
Income 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.
Which 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
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 False