Thomas Publishing Has a Price of $20 a Share,outstanding Shares

question 122

Multiple Choice

Thomas Publishing has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price to earnings ratio which is

• A)high, perhaps indicating that people expect future earnings to rise.
• B)high, perhaps indicating that people expect future earnings to fall.
• C)low, perhaps indicating that people expect future earnings to rise.
• D)low, perhaps indicating that people expect future earnings to fall.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, used to evaluate the trade-offs in resource allocation.

Accounting Profits

The total revenue of a company minus the explicit costs and expenses directly related to its operations, as shown in its financial statements.

Economic Profits

The difference between a firm's total revenue and its opportunity costs; also known as supernormal profit.

Price Elasticity Of Demand

A measure of how sensitive the quantity demanded of a good is to a change in its price.