Which of the following is more likely to be correct if market value of equity is less than book value of equity?
A) Investors anticipate excellent earning potential.
B) Investors anticipate low earning potential.
C) Assets have been fully depreciated.
D) The company is bankrupt.

Question

Quizplus · Accepted Answer

When the market value of equity is less than the book value, it often indicates that investors have a pessimistic view of the company's future earning potential, suggesting they expect lower earnings or financial difficulties.

Which of the Following Is More Likely to Be Correct