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Question 1. Two trustys, of the comparable size and risk, release the yearbook reports on the comparable day. It turns break that they each report the analogous amount of the lowest incom. Following the release, the sh are price of integrityness blotto move strongly whale the early(a) rose just at all(prenominal). Explain how it is possible for the market to contradict possitively to sensation firms annual report and hardly at all to the other when the firms are similar in size, risk and report profitabily. attend: Difficient Accouting method, eg.reducing balance, straghit line metheod. Information Asymmetry and the level of discloure: eg. one is wax discloure information the other one is patically. Question 2. make outs of firm A and frim B are traded on an efficient market. The cardinal firms are of the same size and risk. They both report the same net imcome. However, you see in the financial statement notes that firm A uses the LIFO inventory method and declining-blance amortization for expectant assets, date firm B uses the first in first out inverotry method and flat line amortization. Which firms shares should sell at the higher(prenominal) price-to-earning confine? on the whole other things being equal? Explain. need a dot of rising prices.

Definition of Semi-Strong Form: Share prices ordain fully reflect all publicly accessible information. P/E Ration: grocery store Price/ Market Value Per Share salary Income/Shares Higher P/E Ration means anticipate higer value than the other firm. In periods of increasing prices for both inputs and outputs, FIFO will show a more modest inv entory, and thus, preoccupied other fancya! tions, a pull down asset value for a firm. On the other hand,LIFO will show a higher asset value for a firm. Depriciation methods are not consider as a situation which can influnce the P/E ration. Question 3.If you want to eviscerate a full essay, read it on our website: OrderEssay.net

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