The P/E Ratio Is Not Useful When the Firm's ________

question 59

Multiple Choice

The P/E ratio is not useful when the firm's ________ are negative.In this case,it is common to look at the firm's ________ relative to sales.

• A) operating earnings; enterprise value
• B) net earnings; enterprise value
• C) operating earnings; market value
• D) net earnings; market value

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Definitions:

Product Price

The amount of money required to purchase a good or service, commonly influenced by costs, demand, and supply factors.

Purely Competitive Seller

A seller in a market characterized by many buyers and sellers, free entry and exit, and a homogeneous product where no single seller can influence market price.

Units of Output

A measure of production or productivity, essentially counting the quantity of goods or services produced.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output.