Which of the Following Is Not a Reason the PE

question 94

Multiple Choice

Which of the following is not a reason the PE ratio method may result in an inaccurate valuation for a firm?

• A)potential errors in the forecast of the firm's beta
• B)potential errors in the forecast of the firm's future earnings
• C)potential errors in the choice of the industry composite used to derive the PE ratio
• D)All of the above are reasons the PE ratio method may result in an inaccurate valuation for a firm.

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Definitions:

Deficiency

The shortfall or gap between what is available and what is required or expected.

Capital Accounts

Accounts representing the ownership interest of shareholders or partners in a company, including their initial investment and subsequent earnings.

Cash Distribution

The process of disbursing funds from a company, trust, or fund to its owners, partners, or investors.

Capital Balances

The amount of capital credited to the owners or partners in a company, reflecting their ownership interest.