The PE Method to Stock Valuation May Result in an Inaccurate

question 56

True/False

The PE method to stock valuation may result in an inaccurate valuation for a firm if errors are made in forecasting the firm's future earnings or in choosing the industry composite used to derive the PE ratio.

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Definitions:

Enactive Mastery

Gaining confidence and skill through direct experience and successful practice in specific activities.

Self-Serving Bias

Underestimates internal factors and overestimates external factors as influences on someone’s behavior.

Fundamental Attribution Error

The tendency to attribute others' actions to their character or personality, while attributing one's own behaviors to situational factors.

Performance Problems

Issues or difficulties that negatively affect an individual's or organization's ability to achieve objectives or maintain standards.