Sometimes Analysts Use Other Ratios Such as Price-To-Book or Price-To-Sales

question 29

Multiple Choice

Sometimes analysts use other ratios such as price-to-book or price-to-sales ratio. Which of the following is a weakness of the use of these ratios?

• A) Some companies are structured very differently, especially across industries.
• B) A price-to-book value less than one cannot be assessed.
• C) A high price-to-sales ratio cannot be assessed.
• D) The price-to-sales ratio cannot be used for companies that report a net loss.

---

Definitions:

Wage Rate

The amount of compensation paid to employees per unit of time worked, often expressed per hour or year.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a particular input, assuming all other inputs remain constant.

Wage Rate

The amount of money a worker is paid per unit of time, such as an hour or a month.

Marginal Revenue Product

The extra income produced by using an additional unit of a production input.