Which of the Following Statements Is FALSE

question 90

Multiple Choice

Which of the following statements is FALSE?

• A) The most common valuation multiple is the price-earnings (P/E) ratio.
• B) You should be willing to pay proportionally more for a stock with lower current earnings.
• C) A firm's P/E ratio is equal to the share price divided by its earnings per share.
• D) The intuition behind the use of the P/E ratio is that when you buy a stock, you are in sense buying the rights to the firm's future earnings and differences in the scale of firms' earnings are likely to persist.

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