Which of the Following Is NOT a Limitation of the PE

question 10

Multiple Choice

Which of the following is NOT a limitation of the PE method of valuing stocks?

• A)Stock buybacks can distort a firm's earnings.
• B)Using previous earnings may not be useful for a firm that is restructuring.
• C)The earnings of firms in a cyclical industry may vary dramatically depending on whether the economy is strong or weak.
• D)Creative accounting may distort a firm's reported earnings.
• E)All of the above are limitations of the PE method.

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