The P/E Ratio That Is Based on a Firm's Financial

question 50

Multiple Choice

The P/E ratio that is based on a firm's financial statements and reported in the newspaper stock listings is different from the P/E ratio derived from the dividend discount model (DDM) because

• A) the DDM uses a different price in the numerator.
• B) the DDM uses different earnings measures in the denominator.
• C) the prices reported are not accurate.
• D) the people who construct the ratio from financial statements have inside information.
• E) They are not different-this is a "trick" question.

---

Definitions:

Information Management

is the process of collecting, storing, managing, and distributing information in a way that is efficient and effective.

Leaders

Individuals who guide, influence, or direct others within an organization or community towards achieving shared goals.

Access to Information

Access to information denotes the ease with which individuals can obtain data, knowledge, and insights necessary for making decisions or understanding subjects.

Discretionary Responsibility

The ethical or societal obligation of a company to make decisions and take actions that will benefit the interests of society as well as the organization.