Companies a and C Each Reported the Same Earnings Per

question 102

Multiple Choice

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

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

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Definitions:

Lower Per Unit Costs

A reduction in the cost to produce a single unit of a product or service, usually achieved through economies of scale or technological advancements.

Division Of Labor

The allocation of different tasks to different people or entities based on specialization, contributing to efficiency in production.

Specialize

Refers to focusing on a specific area of study, work, or production to gain expertise and efficiency.

Production Possibilities

A concept in economics that describes the various combinations of goods and services that can be produced in an economy given its available resources and technology.