Which of the following statements is CORRECT?
A) If a firm has the highest price/earnings ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
B) If a firm has the highest market/book ratio of any firm in its industry, then, other things held constant, this suggests that the
Board of directors should fire the president.
C) Other things held constant, the higher a firm's expected future
Growth rate, the lower its P/E ratio is likely to be.
D) The higher the market/book ratio, then, other things held constant,
The higher one would expect to find the Market Value Added (MVA).
E) If a firm has a history of high Economic Value Added (EVA) numbers each year, and if investors expect this situation to continue, then
Its market/book ratio and MVA are both likely to be below average.

Question

Quizplus · Accepted Answer

The market/book ratio is a measure of how highly the market values a company compared to its book value. A higher market/book ratio suggests that investors expect higher growth and profitability, which should increase the Market Value Added (MVA), as MVA reflects the difference between the market value of a company and the capital contributed by investors.

Which of the Following Statements Is CORRECT