Assuming That Other Things Are Constant, the Price Earnings (P/E)

question 73

Multiple Choice

Assuming that other things are constant, the price earnings (P/E) ratio:

• A) is higher for firms with high growth prospects and lower for riskier firms.
• B) is lower for firms with high growth prospects and higher for riskier firms.
• C) is not affected by the growth prospects of the firm.
• D) is equal to the market price of the share of the firm.
• E) is equal to the earnings per share of the firm.

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Definitions:

Due Date

The specified date by which a task needs to be completed or a payment needs to be made.

Current Liability

A financial obligation that a company is required to pay within one year.

Currently Recognized Revenues

This refers to revenues that have been earned and recorded within the current accounting period, aligning with the accrual basis of accounting.

Account Payable

An obligation of a business to pay a supplier for products or services received, typically recorded as a current liability.