A Low P/E for a Stock Indicates That

question 133

Multiple Choice

A low P/E for a stock indicates that

• A)people may expect earnings to fall in the future,perhaps because the firm will be faced with increased competition.
• B)its dividends have been low so that no one is willing to pay very much for it.
• C)the corporation is possibly overvalued.
• D)All of the above are correct.

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Definitions:

Capitalized Trucks

The value of trucks owned by a company that is treated as an asset on the balance sheet and depreciated over time.

Sum-Of-The-Years'-Digits Method

A method of accelerated depreciation calculating annual depreciation expense based on the sum of the years' digits of an asset's useful life.

Double-Declining-Balance Method

An accelerated depreciation method that expenses more of an asset’s cost closer to the beginning of its usable life.

Depreciable Asset Accounting

The accounting process that involves allocating the cost of a tangible asset over its useful life.