Which two of the following statements accurately explain why the companies described cannot easily be valued using income- flow- based methods?
A) The probable reserves of oil companies have a large influence on their valuation.
B) The variable costs of raw materials make it difficult to assess manufacturing company income.
C) The range of shares held makes it relatively simple for a shareholder to assess the income of an investment trust.
D) Property investment companies are primarily valued on the basis of their assets.

Question

Quizplus · Accepted Answer

A) The probable reserves of oil companies have a large influence on their valuation.
B) The variable costs of raw materials make it difficult to assess manufacturing company income.
C) The range of shares held makes it relatively simple for a shareholder to assess the income of an investment trust.
D) Property investment companies are primarily valued on the basis of their assets.

D) Property investment companies are primarily valued on the basis of their assets (properties), and not necessarily their income generation. Therefore, income flow-based methods may not accurately reflect the value of these companies.

Which Two of the Following Statements Accurately Explain Why the Companies