CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

Which statement is false?

I. Companies in the high-tech industry tends to have higher price-to-book ratios than companies in the agricultural industry.
II. The ultimate goal of management is to maximize the book value of the company's equity.
Correct Answer: II

I is true. That's why the ratio should not be used to compare companies in different industries.

User Contributed Comments 4

User Comment
farhan92 ROE =NI/BV

so the maths suggests you would want to make BV as small as possible to maximise ROE...so anything that reduces assets (operation lease, depreciation) will max ROE
Inaganti6 Isn't equity like the epitome of wealth in a publicly listed company ? A big equity sections?
guest Market Value of Equity is Important for Publicly Listed Companies.
Book Value of Equity is important but its not the ULTIMATE goal of the management. Businesses main goals are: to maximise profits, minimise costs and increase market share.
khalifa92 increase book value & maximize market value
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