Equity Investments - Equity Investments Section 2
21. Which of the following statements most likely corrrect?
- Option : C
- Explanation : A change in investors’ expectations can impact a company’s market value. Management can directly influence the book value of a company but not the market value. A decrease in book value will not necessarily cause the market value to decrease.
- Option : C
- Explanation : Book value = Total assets – Total liabilities = $24,000,000 - $10,500,000 = $13,500,000.
23. A company’s ROE will most likely decrease, holding all other factors constant, if:
- Option : B
- Explanation : An increase in net income at a slower rate than shareholders’ equity will cause the ROE to decrease as denominator increases faster than the numerator.
25. Which of the following situations will least likely lead to an increase in a company’s ROE?
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