Which of the Following Statements Concerning the Price-To-Earnings (PE)ratio Is

question 45

Multiple Choice

Which of the following statements concerning the price-to-earnings (PE) ratio is NOT true?

• A) The PE ratio is calculated as: (current market price per share)/ (dividend payout ratio).
• B) High-PE companies are those that are popular.
• C) The PE ratio compares present performance with expectations of future performance.
• D) A company with a low price PE ratio is expected to show reduced future performance.

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Definitions:

Statement of Owner's Equity

A financial statement that shows changes in the equity of a company's owner(s) over a period, including investments, withdrawals, and the company's net income or loss.

Accumulated Depreciation

Full amount of depreciation expenses that have been attributed to a fixed asset since it was deployed.

Financial Statements

Reports that summarize the financial performance and health of a business including balance sheet, income statement, and cash flow statement.

Balance Sheet

A summary record that outlines a firm's assets, liabilities, and equity held by shareholders at a specific timeframe, showing its financial status.