Stock issued by company have higher rate of return because of______________?
Correct answer: B. High book to market ratio
- A. Low market to book ratio
- B. High book to market ratio
- C. High market to book ratio
- D. Low book to market ratio
Explanation
Value stocks with a high book-to-market ratio have historically earned higher average returns than low book-to-market, or growth, stocks. Thus high book value relative to market price is the relevant characteristic.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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