The Price/earnings Ratio

question 53

Multiple Choice

The price/earnings ratio:

• A) Is calculated by multiplying the market price of a stock by its earnings per share.
• B) Is found by dividing the market price of a stock by the firm's total earnings.
• C) Is computed by dividing the book value of a stock by the firm's EPS.
• D) Is calculated by adding the market price of a stock to the firm's EPS.
• E) Is found by dividing the market price of a stock by the firm's EPS.

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life, reflecting what a company expects to recover to offset initial costs.

CCA Depreciation

Stands for Capital Cost Allowance Depreciation, which is a way to claim a tax deduction for the depreciating value of assets over time in Canada.

Market Value

The market's present selling or buying price for an asset or service.

CCA Class

Refers to the classification of tangible property under the Canadian Capital Cost Allowance for purposes of tax depreciation.