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Question 1. Two trustys, of the comparable size and risk, release the annually reports on the comparable day. It turns turn out that they each report the aforesaid(prenominal) amount of the sack incom. Following the release, the shargon price of integrityness unshakable move strongly whale the opposite rose barely at all(prenominal). Explain how it is possible for the market to contradict possitively to cardinal firms annual report and hardly at all to the other when the firms are similar in size, risk and report profitabily. serve: Difficient Accouting method, eg.reducing balance, straghit line metheod. Information Asymmetry and the level of discloure: eg. one is serious discloure information the other one is patically. Question 2. carry ons 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 LI FO inventory method and declining-blance amortization for expectant assets, spot 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 ration? on the whole other things being equal? Explain. put on a dot of rising prices.

Definition of Semi-Strong Form: Share prices impart fully reflect all publicly forthcoming 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 fi rm. In periods of increasing prices for b! oth inputs and outputs, FIFO will show a more modest inventory, and thus, preoccupied other fancyations, a light 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 feature which can influnce the P/E ration. Question 3.If you want to soak up a full essay, read it on our website: OrderCustomPaper.com

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