Which of the Following Are True Concerning the Use of Price-To-Earnings

question 11

Multiple Choice

Which of the following are true concerning the use of price-to-earnings multiples to evaluate a high-growth company?
I.They cannot be used when earnings are negative.
II.They provide insight into what drives the company's valuation.
III.They generate imprecise results when earnings are highly volatile.
IV.They account for the unique characteristics of each company in a fast-changing environment.

• A)I and II only.
• B)I and III only.
• C)II and III only.
• D)III and IV only.

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Definitions:

Invoice

A document issued by a seller to a buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided to the buyer.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the ownership interest.

Drawing Account

An account used by a sole proprietor to track money withdrawn from the business for personal use.

Total Assets

The sum of all current and non-current assets owned by a company, representing its overall value.