CHAPTER 7 QUIZ 26 TO 30 26. The key to firms having assets as sources of value is their current return on these assets. 27. Firms with highly liquid cash positions may be attractive merger candidates mainly because their cash can be used to pay dividends. 28. When using the combined earnings and dividend model, the longer the time period used is, the more risky the forecast of future earnings is. 29. For cyclical companies, the most accurate price-earnings ratio would be derived by dividing the current stock price by the latest 12 months earnings. 30. Inflation has an indirect effect on price-earnings ratios.