Which of the Following Will Affect Observed Price-To-Earnings Ratio (Lagged

question 40

Multiple Choice

Which of the following will affect observed price-to-earnings ratio (lagged ratio) :

I. Quality of earnings
II. Business risk
III. Risk free rate of interest
IV. Expected growth

• A)I, II, III, and IV
• B)II, III, and IV
• C)II and IV
• D)I, II, and IV

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Definitions:

Franchise Arrangements

Agreements where one party (the franchisor) grants another party (the franchisee) the right to use its trademark or brand name and operate a business under its business model.

Exclusive Right

A legal provision granting someone the sole authority to undertake a particular activity or use a specific property.

Franchisor's Name

The legal name of the entity that grants the license to a franchisee for the conducting of a business under the franchisor's trademarks and business model.

Installment Sales Method

An accounting technique for recognizing revenue and expenses for sales made on credit, proportionate to the cash collected from the customer.