Worcester Corporation Has a P/E Ratio of 15

question 64

Multiple Choice

Worcester Corporation has a P/E ratio of 15. Natick Corporation is in the same industry as Worcester, but has a P/E ratio of 20. Possible interpretations of this discrepancy include

• A) Natick corporation has higher earnings per share.
• B) Worcester corporation is overpriced.
• C) Investors expect Natick to grow faster than Worcester.
• D) Natick's share price is higher than Worcester's.

---

Definitions:

FIFO

An inventory valuation method, "First-In, First-Out", where goods first bought are the first to be sold.

LIFO

Last In, First Out; an inventory valuation method where the items acquired last are the first to be sold.

Weighted-Average

A statistical method used to attribute different weights to data points or components based on their significance.

Cost Flow

Describes the manner in which costs move through a company's accounts, from the point of initial recording to their ultimate impact on financial statements.