If Squid Roe Company's P/E Ratio Is 12,which of the Following

question 52

Multiple Choice

If Squid Roe Company's P/E ratio is 12,which of the following statements is correct?

• A)Investors are willing to pay 12 times the current year's earnings per share of stock.
• B)Squid Roe's stockholders earned 12 times the owners' average investment.
• C)Squid Roe's average stockholders' equity is 12 times its earnings.
• D)Squid Roe's net income was 12 times its stockholders' equity.

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Definitions:

Slope

In mathematics and economics, a measure of steepness or incline, often representing the rate of change of a function on a graph.

Cost Driver

A factor that causes a change in the cost of an activity or a product, such as production volume or labor hours.

Activity-based Costing

A methodology that assigns production costs to products based on the activities required to produce them, aiming for more accurate cost allocation.

Volume-based

A pricing or costing method that changes based on the amount of goods or services produced or sold.