A P/E Ratio for a Firm That Is Higher Than

question 51

Multiple Choice

A P/E ratio for a firm that is higher than the industry average may indicate:

• A)the firm's growth prospects are seen as being below its competitors
• B)the share is probably underpriced and so you would give a 'buy' recommendation
• C)the share is probably underpriced so you would give a 'sell' recommendation
• D)the share is relatively expensive
• E)None of these.

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Definitions:

Months

Units of time, each roughly equivalent to one twelfth of a year, used in planning and organizing.

Rate Of Interest

The percentage of the principal that will be charged for a particular period of time, normally one year.

Interest

The charge for borrowing money or the return on deposited funds, typically expressed as a percentage rate over a period of time.

Simple Annual Interest Rate

The percentage of the principal amount that will be charged or earned as interest, calculated once per year without compounding.