Reading 45: Residual Income Valuation-LOS b 习题精选 center, class, equity, following, 2011

土豆妮

Session 12: Equity Investments: Valuation Models
Reading 45: Residual Income Valuation

LOS b: Discuss the uses of residual income models.

 

 

Which of the following is the most appropriate tool to measure managerial effectiveness, goodwill impairment, and equity value?

A) Gordon growth model.

B) Residual income.

C) Free cash flow to the firm.

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Residual income is commonly used to measure managerial effectiveness, goodwill impairment and equity value. The Gordon Growth Model (GGM) would not be appropriate in instances where the underlying assumptions (such as stable growth in perpetuity) do not apply. Free cash flow to the firm and price to sales would often not be appropriate tools to measure goodwill impairment.

土豆妮

A residual income model would be least appropriate as a tool to measure which of the following?

A) Operating leverage.

B) Economic income.

C) Goodwill impairment.

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Operating leverage is not measured directly by residual income models, although operating leverage may have an effect on the residual income measured. Residual income models are intended as a measure of economic income, and are often used to measure goodwill impairment.

土豆妮

The residual income approach is appropriate when:

A) a firm does not pay dividends or the payments are too volatile to be sufficiently predictable.

B) a firm pays high dividends that are quite stable.

C) the clean surplus accounting relation is violated significantly.

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The residual income approach is appropriate when a firm does not pay dividends or the payments are too volatile to be sufficiently predictable. It is not appropriate when the clean surplus accounting relation is violated significantly. A firm that pays high dividends that are quite stable is also a poor candidate for the approach.