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:

Maintenance Department

A division within an organization dedicated to the upkeep and repair of facilities, machinery, and equipment to ensure operational efficiency.

Operating Divisions

Subsections within a company, each responsible for certain functions or geographic areas, contributing to the company's overall business operations.

Variable Costs

Costs that change in proportion with the level of output or activity.

Fixed Costs

Expenses that do not change with the level of output or sales, such as rent, salaries, and insurance premiums.