Question

please answer the below correctly.

Which of the following ratios usually reflects investors’ opinions of the future prospects for the firm?

		Dividend yield
		Book value per share
		Price/earnings ratio
		Earnings per share
		Dividend payout. Edward I. Altman developed a multivariate model to predict bankruptcy. The model produces an overall discriminant score called a Z value. Which of the following statements is probably an UNREASONABLE statement relating to the Z value? The sales generating ability of the firm's assets is one of the important considerations in the Z value. The lack of a market value for a company's stock will reduce the significance of the Z value approach. Total assets is an important consideration in the Z value computation. Cumulative profitability over time is considered in the Z value computation. A Z score of 2.00 or below indicates a very healthy company. Which of the following is NOT considered to be a nonrecurring item? Discontinued operations. Extraordynary items. Cumulativm effect of change in accounting principle Interest expense None of the above

Answer 1

1) Which of the following ratios usually reflects investors’ opinions of the future prospects for the firm?

Ans: Price/earnings ratio

Price-earnings ratios are the most popular way to assign a relative value to a stock, and it is one of the techniques that investors use to make decisions.

2) Edward I. Altman developed a multivariate model to predict bankruptcy. The model produces an overall discriminant score called a Z value. Which of the following statements is probably an UNREASONABLE statement relating to the Z value?

Ans: A Z score of 2.00 or below indicates a very healthy company.

Altman precisely researched significance of critical values in bankruptcy classification. The bigger the z-score is for the company the healthier it is. Altman noticed that companies which had z-score over the value 2.99 were still operating and located so called safe zone. Correspondingly companies with z-score under 1.81 were bankrupt companies.

3) Which of the following is NOT considered to be a nonrecurring item?

Ans: Interest Expense

Interest Expense is a recurring item

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