Taggart Company Has a P/E Ratio of 13 in Year

question 253

Multiple Choice

Taggart Company has a P/E ratio of 13 in year 2016 and 12.5 in 2017.In 2018,its P/E ratio is 19.5.The best way to interpret these data is to conclude that:

• A)the stock is overpriced and should be sold.
• B)the stock has great growth capacity and should be bought.
• C)other financial results and news should be examined to determine the cause of the P/E ratio change.
• D)the stock is underpriced and should be bought.

---

Definitions:

Direct Material Standards

The anticipated cost and quantity of materials required for the production of goods or services.

Actual Cost

Actual cost refers to the exact amount of expenses incurred for producing a product or performing a service, contrasted with estimated or budgeted costs.

Standard Cost System

An accounting system that uses predetermined costs for product costing and decision making, facilitating budgeting and variance analysis.

Standards

Criteria or benchmarks used for measuring performance or quality in various fields, including manufacturing, auditing, and accounting.