According to Exhibit 4.1 in the textbook (Ratio of Market Value to Book Value for Selected Companies),firms with high market value to book value ratios achieve this because of their ________ investment in ________ resources and technological expertise.
A) low; physical
B) low; tangible
C) high; knowledge
D) high; liquid asset

Question

Quizplus · Accepted Answer

As shown in Exhibit 4.1, firms such as Apple, Alphabet (parent of Google), Microsoft, and Oracle have very high market value to book value ratios because of their high investment in knowledge resources and technological expertise. In contrast, firms in more traditional industry sectors such as Nucor and Southwest Airlines have relatively low market-to-book ratios. This reflects their greater investment in physical resources and lower investment in knowledge resources. A firm like Intel has a market-to-book value ratio that falls between the above two groups of firms. This is because its high level of investment in knowledge resources is matched by a correspondingly huge investment in plant and equipment.