Which of the Following Statements Is FALSE

question 15

Multiple Choice

Which of the following statements is FALSE?

• A) The most common valuation multiple is the price-earnings ratio.
• B) You should be willing to pay proportionally more for a stock with lower current earnings.
• C) A firm's price-earnings ratio is equal to the share price divided by its earnings per share.
• D) The intuition behind the use of the price-earnings ratio is that when you buy a stock, you are in a 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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Definitions:

Standard Deviation

A numerical indicator that calculates the degree of spread or deviation of data points from their average.

Payoffs

The outcomes or benefits received from a particular action or decision, often used in the context of game theory.

Standard Deviation

A measure of the dispersion or variation in a set of values, indicating how much they deviate on average from the mean.

Variance

A statistical measurement of the dispersion of a set of data points around their mean, indicating how spread out the data are.