Which one of the following is true about book and market values?
A) Book-to-market values provide information about the efficient use of assets.
B) A high book to market ratio is well perceived by the market.
C) If the return on equity is lower than the required rate of return, the market-to-book ratio will decrease.
D) Determining prices in regulated industries depends on the market value of assets.

Question

Quizplus · Accepted Answer

If the return on equity is lower than the required rate of return, it suggests that the company is not utilizing its assets efficiently, which leads to a decrease in the book-to-market ratio. The other options are not true. A high book-to-market ratio suggests undervaluation of a company, which is not always well perceived by the market. Determining prices in regulated industries depends on regulatory bodies and not necessarily on the market value of assets.

Which One of the Following Is True About Book and Market