The P/E Ratio for BMI Corporation Is 21,and the P/S

question 45

Multiple Choice

The P/E ratio for BMI Corporation is 21,and the P/S ratio is 5.2.The industry P/E ratio is 35 and the industry P/S ratio is 7.5.Based on relative valuation,BMI is

• A) undervalued on the basis of relative P/E and relative P/S.
• B) overvalued on the basis of relative P/E and undervalued on the basis of relative P/S.
• C) undervalued on the basis of relative P/E and overvalued on the basis of relative P/S.
• D) overvalued on the basis of relative P/E and relative P/S.
• E) none of the above.

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Definitions:

Economic Analysis

The systematic approach to determining the optimum use of scarce resources, involving comparison of two or more alternatives in achieving specific objectives.

Workers Pay

The compensation, including wages, salaries, and benefits, that an employee receives from an employer in exchange for their labor.

Excise Tax

A specific tax levied on certain goods, such as cigarettes or alcohol, usually to discourage their use or generate revenue.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount they actually pay.