Which of the Following Statements Regarding the P/E Ratio Is

question 52

Multiple Choice

Which of the following statements regarding the P/E ratio is NOT true?

• A) The P/E ratio indicates how much investors are willing to pay for a stock as a multiple of current earnings.
• B) A high P/E ratio may mean that investors have pushed the price of the stock up in anticipation of higher future net income.
• C) If EPS decreases and there is no change in the market price of the stock, the P/E ratio will decrease.
• D) If the market price of the stock increases and there is no change in EPS, the P/E ratio will increase.

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Definitions:

Bank Statement Adjustment

The process of reconciling differences between the balance shown on a bank statement and the amount shown in a company's financial records.

Interest Revenue

Income that is earned from investments, loans, or any other interest-bearing assets.

Internal Control

A process designed to ensure the reliability of financial reporting, compliance with laws and regulations, and effective and efficient operations.

Monitoring

Involves the continual oversight of activities, processes, or systems to ensure they are functioning correctly and achieving desired outcomes.