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SSC Audit Tax Finance P-II QUESTION #6172
Question 1
A firm's 'Market/Book' ratio is less than 1.0. What might this indicate to an investor?
  • The stock is potentially overvalued
  • The firm is generating massive EVA
  • Equity investors regard the company's value as less than its accounting book value✔️
  • The firm has zero debt
Correct Answer Explanation
A ratio below 1.0 suggests the market values the firm's assets at less than their historical cost recorded on the balance sheet.