Companies E and P Each Reported the Same Earnings Per

question 33

Multiple Choice

Companies E and P each reported the same earnings per share (EPS) ,but Company E's stock trades at a higher price.Which of the following statements is CORRECT?

• A) Company E probably has fewer growth opportunities.
• B) Company E is probably judged by investors to be riskier.
• C) Company E must have a higher market-to-book ratio.
• D) Company E must pay a lower dividend.
• E) Company E trades at a higher P/E ratio.

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Definitions:

Alfalfa

Alfalfa is a perennial flowering plant widely cultivated as fodder for cattle due to its high nutrient content.

Comparative Advantage

An economic principle that suggests a country, individual, or company is most efficient at producing a certain good or service compared to others, enabling trade benefits.

Absolute Advantage

The ability of a country, company, or individual to produce a good or service at a lower cost per unit than competitors using the same amount of resources.

Soybeans

A leguminous plant originating from East Asia, extensively cultivated for its consumable beans that have various applications.