Discuss how risk and profitability factors cause differences in price-earnings ratios across firms. Explain the difference between abnormal and normal earnings
Abnormal earnings are referred to as residual income. Residual income is the difference between expected comprehensive income in year x and required earnings of the firm in year x. Residual income measures the amount of wealth that the firm will create (destroy). Normal earnings or required earnings is the product between the required rate of return on common stock equity times the book value of common stock equity at the beginning of the year,
You might also like to view...
Which of the following statements about bond accounting under the effective interest method is correct?
a. The cash interest paid is calculated as the bond face value × the effective rate. b. The interest expense is calculated as the carrying value × the effective rate. c. The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium. d. The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount.
Compare and contrast the following disaster recovery options: empty shell, recovery operations center, and internally provided backup. Rank them from most risky to least risky, as well as most costly to least costly
______ language is the deliberate, purposeful, and hurtful use of words intended to oppress someone who has a different skin color than the speaker.
Fill in the blank(s) with the appropriate word(s).
Media mentions and word-of-mouth are non-threatening means for consumers to gain awareness of products and to recognize their need for them
Indicate whether the statement is true or false