Which of the following applies to the clean surplus theory?
a. It is a theory that is applied to security valuation, but is not very attuned to accounting concepts and numbers.
b. The theory values a firm’s equity based on the beginning of the period book value plus the present value of expected future abnormal earnings.
c. The theory considers a firm’s abnormal earnings amount to be equal to its beginning of the period book value multiplied by the cost of equity capital.
d. This theory does not tie in well with the FASB’s concept of comprehensive income.
ANSWER: B
You might also like to view...
A communication ________ refers to a plan for what and how to communicate to ensure that a message achieves its purpose
A) strategy B) memorandum C) code D) blueprint E) schema
The lower the level of customer loyalty is for a product, the ________
A) stronger the existing brand relationships are B) stronger the media plans are C) stronger the copy tests are D) more opportunity there is to gain sales E) more opportunity there is to integrate marketing
Green Haven is an organization whose earnings are exempt from federal and state income taxes. Individuals who contribute money to the organization can avail the benefit of tax deduction. However, the organization is barred from distributing dividends to its members. Given this information, Green Haven is most likely a(n):
A. S corporation. B. C corporation. C. not-for-profit corporation. D. statutory close corporation.
Seasonality is introduced into financial ratios by averaging monthly account balances, and thus it is
recommended that ending account balances be used. Indicate whether the statement is true or false