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A Higher Price/earnings Ratio Signifies a Higher Return on Investment

question 52

True/False

A higher price/earnings ratio signifies a higher return on investment.


Definitions:

Margin Of Safety

The difference between actual or projected sales and the break-even point, usually expressed in percentage terms, indicating the buffer against a loss.

Operating Leverage

The degree to which a firm can use fixed operating costs to magnify the effects of changes in revenue on its operating income.

Salesvolume

Refers to the total number of units sold within a specific period.

Net Operating Income

The profit generated from a business's operations after subtracting operating expenses, but before interest and taxes.

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