Which of the following is least likely to account for an excess of market value over book value of equity?
A) Inaccurate depreciation methods
B) High rate of return on assets
C) The presence of growth opportunities
D) Valuable off-balance sheet assets

Question

Quizplus · Accepted Answer

Inaccurate depreciation methods could potentially lead to an understatement of book value and an overstatement of market value. However, it is less likely to account for an excess of market value over book value of equity compared to the other options listed. B, C, and D are all factors that could contribute to a higher market value of equity, as a high rate of return on assets, presence of growth opportunities, and valuable off-balance sheet assets could all potentially boost expectations for future profits and cash flows.

Which of the Following Is Least Likely to Account for an Excess