The Price-Earnings Ratio Is Not Affected by an Increase or Decrease

question 48

True/False

The price-earnings ratio is not affected by an increase or decrease in the firm's earnings.

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Definitions:

Patent Impairment

Refers to the decrease in the value of a patent, often due to technological advances, legal issues, or changes in market demand.

Amortization

The gradual repayment or write-off of an intangible asset or loan balance over a set period.

Useful Life

The estimated period that an asset is expected to be usable for the purpose it was acquired, affecting its depreciation or amortization.

Straight-Line Method

A method of calculating depreciation of an asset where its cost is evenly spread over its useful life.