Which of the Following Is NOT a Negative Attribute of the Price-Earnings

question 27

Multiple Choice

Which of the following is NOT a negative attribute of the price-earnings multiple valuation model?

• A)It implicitly assumes that comparable firms are already fairly pried in the market place.
• B)Its focus on earnings may be clouded by dubious accounting assumptions.
• C)It is based on relative market measures rather than book measures.
• D)It cannot be used when there are negative earnings.(This would imply a firm value of less than $0!)

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Definitions:

Four Pinions

Describes a gear assembly configuration that includes four pinion gears, often found in differential assemblies to evenly distribute torque to the wheels.

Truck Differential

A mechanical device in a truck that allows the outer drive wheel to rotate faster than the inner drive wheel during a turn, improving traction and handling.

Tandem Drive Truck

A truck with two rear axles, both of which are drive axles, providing better traction and load distribution.

Spinout

Occurs when differential action allows one drive wheel on a slippery surface to spin while the other remains stationary and receives no driving torque. On tandem drive trucks, because of the additional differential action between the drive axles, it is possible to turn a spinning wheel at four times its normal speed. This can take out the interaxle differential or carrier differential. Spinout is a driver abuse failure of differential carriers.