Which of the Following Statements Regarding the P/E Ratio Is

question 129

Multiple Choice

Which of the following statements regarding the P/E ratio is not true?

• A)The P/E ratio indicates how much investors are willing to pay for a share of a company's stock as a multiple of current earnings.
• B)A high P/E ratio may mean that investors have pushed the price of the stock up in anticipation of higher future net income.
• C)If EPS decreases and there is no change in the market price of the stock,the P/E ratio will decrease.
• D)If the market price of the stock increases and there is no change in EPS,the P/E ratio will increase.

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Definitions:

Direct Labor Cost

The total cost of all labor that is directly involved in the production of goods or services.

Manufacturing Overhead

The indirect factory-related costs that are incurred when producing a product.

Total Manufacturing Costs

The sum of all expenses directly associated with the production of goods, including direct labor, direct materials, and manufacturing overhead.

Predetermined Overhead Rate

Predetermined Overhead Rate is a rate calculated before a period begins, used to allocate estimated overhead costs to products or job orders based on a selected activity base.