The Price-Earnings Ratio on Common Stock Is Calculated as

question 7

Multiple Choice

The price-earnings ratio on common stock is calculated as

• A) market price per share of common stock, divided by earnings per share on common stock
• B) earnings per share of common stock, divided by market price per share of common stock
• C) market price per share of common stock, divided by dividends per share of common stock
• D) dividends per share of common stock, divided by earnings per share on common stock

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Definitions:

Oligopolists

Firms that are part of an oligopoly, a market structure dominated by a small number of large companies, leading to limited competition.

Elasticity of Demand

A measure of how sensitively the quantity demanded of a good responds to changes in other economic factors, such as price or consumer income.

Collusive Agreement

A secret or illegal cooperation or agreement between parties to limit competition and manipulate market conditions to their advantage.

Cartel

An association of independent businesses or countries that work together to control prices and limit competition in a specific market.