Which of the Following Statements About the Price/Earnings Ratio Is

question 155

Multiple Choice

Which of the following statements about the Price/Earnings ratio is not correct?

• A)The Price/Earnings 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 Price/Earnings 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 Price/Earnings ratio will decrease.
• D)If the market price of the stock increases and there is no change in EPS,the Price/Earnings ratio will increase.

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Definitions:

Nucleus

A membrane-bound organelle found in eukaryotic cells that contains most of the cell's genetic material and regulates gene expression and cell division.

Chloroplast

The organelle found in plant cells and some algae that is responsible for photosynthesis.

Plant Cell

The basic structural and functional unit of plants, characterized by a cell wall, chloroplasts, and a large central vacuole.

Peptidoglycan

A complex polymer that forms a mesh-like layer outside the plasma membrane of most bacteria, providing structural support and shape.