Answer:
B) Using a market multiple assumes that the target company is mispriced, while comparable companies are correctly priced.
Explanation:
Market Multiple, also known as trading multiples, is used to compare two financial measures, to determine the value of a company. It is another name for Price to Earnings Ratio (also called P/E Ratio).
Using the market multiple approach, investors can determine whether stocks in their portfolios will increase or decrease in price through the next term. Investors may then buy or sell stocks in order to maximize their expected gains calculated.
Answer:
d.the company is precisely breaking even.
Explanation:
Margin of safety is referred to current sales - Break even sales ratio to current sales as a percentage.
Basically it is quoted as follows:
Therefore, when the current sales = Break even sales then only the company will have margin of safety = 0
Thus, at 0 margin of safety the company basically is at no profit no loss situation, that is break even.
The correct option is (a) sales; average book value of fixed assets.
The fixed asset turnover ratio is computed as sales divided by average book value of fixed assets.
The fixed asset turnover ratio demonstrates the effectiveness of a company's current fixed assets in driving sales. A greater ratio suggests that management is making better use of its fixed assets. No information can be gleaned from a high FAT ratio about a company's capacity to produce reliable earnings or cash flows.
The ratio of sales to the value of fixed assets is known as fixed-asset turnover. It shows how effectively the company is generating sales by utilizing its fixed assets.
A greater ratio is typically preferred since it suggests that the business is effective at producing sales or revenues from its asset base. A lower ratio suggests that a business is not utilizing its resources effectively and may be experiencing internal issues.
Learn more about fixed asset turnover ratio
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Answer:
Full funding policy.
Explanation:
This would be a violation of Full funding policy.
Full funding strategy is a federal budgeting requirement implemented by Congress in the 1950s on the Department of Defense (DOD) that mandates all acquisition expenses of a weapons or piece of military equipment to be financed in the year the object is procured. Hence in the above example there is violation of Full funding strategy.
