Say That for a Number of Years a Company's Share

question 37

Multiple Choice

Say that for a number of years a company's share price was around $24 and its earnings per share approximately $2.You determine that its earnings are likely to increase to $2.50 per share this period for various reasons.Which statement is correct?

• A)The company has a P/E ratio of 12.
• B)Your P/E analysis suggests the share price will move to $30.
• C)You would make a buy recommendation.
• D)You assume that the P/E ratio will remain stable.
• E)If the change in earnings is permanent, all of these are correct.

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Definitions:

Distributor's Liability

Legal accountability faced by distributors for selling or distributing defective products that cause harm or loss to the purchasers.

Manufacturer's Negligence

Occurs when a manufacturer fails to meet a duty of care owed, leading to a defective product that causes harm.

Fiduciary Duty

A legal obligation to act in the best interest of another party, typically involving a relationship of trust, such as between a trustee and the beneficiaries of the trust.

Financial Risk

The possibility of losing financial capital due to market fluctuations, operational failures, or other external events.