When Will the Price/earnings Ratio Change

question 1

Multiple Choice

When will the price/earnings ratio change?

• A)At the end of each year
• B)Every time dividends are paid
• C)Every time a share of stock is traded
• D)Every time the stock price changes

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Definitions:

Financial Leverage

The use of borrowed funds (debt) to amplify returns from investments or projects.

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.

Company's Risk

Refers to the potential for loss or adverse effects on a company's financial health and operational performance, due to internal or external factors.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest held by shareholders.