Which of the following is inconsistent with a firm that sells for very near book value?
A) Low current earning power
B) No intangible assets
C) High future earning power
D) Low, unstable dividend payment

Question

Quizplus · Accepted Answer

A firm that sells for very near book value implies that the market value of the company is similar to its accounting value. This indicates that the market does not place a high value on the firm's future earning power, as it is already reflected in the accounting value. Therefore, option C, which suggests high future earning power, is inconsistent with a firm that sells for very near book value. Options A, B, and D are consistent with a firm that sells for very near book value, as low current earning power, no intangible assets, and low, unstable dividend payments can all contribute to a lower market value relative to the accounting value.

Which of the Following Is Inconsistent with a Firm That