What are the three arguments economists provide against using earnings as a value-relevant attribute in valuation?
Economists point out that firms pay dividends in cash, not earnings, and that investors can spend cash but cannot spend earnings for future consumption.
Economists also argue that earnings numbers reflect accounting methods that no longer reflect underlying economic values--for example, the expensing of research and development costs that turn out to be successful.
Economists also suggest that earnings are subject to management by members of the firm.
You might also like to view...
Stakeholder theory states that a firm should be managed for the sole benefit of stockholders.
Answer the following statement true (T) or false (F)
Procurement can help a company answer the following question: What quantity of raw materials should we purchase to minimize spoilage?
Answer the following statement true (T) or false (F)
Jenifer owns a bakery that specializes in preparing extravagant wedding cakes. She is a sought-after baker because of the quality and finesse of her products. Jenifer believes that the pressure of living up to the expectations of her customers and delivering quality products always keeps her on the edge and helps her to deliver her best. Which of the following advantages of entrepreneurship is highlighted in the given scenario?
A. Challenge B. Independence C. Survival D. Flexibility
Brokers need not disclose issues about a property if those issues have been fixed
Indicate whether the statement is true or false