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The Price-Earnings Ratio Frequently Is Used by Analysts and Investors

question 7

Essay

The price-earnings ratio frequently is used by analysts and investors for evaluating stock prices because it relates the earnings of the business to the current market price of the stock.The ratio is computed by dividing the market price per share by the earnings per share before extraordinary items.
Explain how the price-earnings ratio should be interpreted,including any problems associated with the interpretation of the ratio.


Definitions:

Psychokinesis

The purported ability to move or manipulate objects with the mind without physical interaction.

Synesthesia

A brain disorder where activating one sense or cognitive route automatically causes unintended experiences in another sense or cognitive route.

Kinesthesia

The ability to perceive the position, weight, or motion of muscles, tendons, and joints within the body.

Sensory Interaction

The principle that one sense may influence another, as when the smell of food influences its taste.

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