Equity Investments - Equity Investments Section 2

Avatto>>CFA Level 1>>PRACTICE QUESTIONS>>Equity Investments>>Equity Investments Section 2

21. Which of the following statements most likely corrrect?

  • Option : C
  • Explanation : A change in investors’ expectations can impact a company’s market value. Management can directly influence the book value of a company but not the market value. A decrease in book value will not necessarily cause the market value to decrease.
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23. A company’s ROE will most likely decrease, holding all other factors constant, if:

  • Option : B
  • Explanation : An increase in net income at a slower rate than shareholders’ equity will cause the ROE to decrease as denominator increases faster than the numerator.
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