One Problem with the Price-Earnings Ratio Commonly Reported Is That

question 43

Multiple Choice

One problem with the price-earnings ratio commonly reported is that:

• A) it divides share price, which reflects the present value of future earnings by historical earnings.
• B) it divides share price, which reflects the present value of book value by historical earnings.
• C) it does not take into consideration the present value of future earnings.
• D) it is based on analysts' expectations.

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Definitions:

Disjunctive Syllogism

A form of logical argument that concludes one disjunct must be false if the other disjunct is true in a "either/or" scenario.

Particular Proposition

A statement in logic that asserts something about one or more but not all members of a class.

Robust

Strong and effective in all or most situations and conditions; capable of withstanding or overcoming adverse conditions.

Valid Argument

A logical statement where the conclusion necessarily follows from the premises, based on sound reasoning.