Which of the Following Statements Regarding the Price/earnings Ratio Is

question 191

Multiple Choice

Which of the following statements regarding the price/earnings ratio is incorrect?

• A) The price/earnings ratio represents the market price of one share of common stock.
• B) A price/earnings ratio of 9.2 implies that the company's stock is selling at 9.2 times one year's earnings per share.
• C) A higher price/earnings ratio signifies a higher return on investment.
• D) The price/earnings ratio is most useful when comparing one company to another.

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Exemplars

Representative examples or cases that illustrate a concept, method, or phenomenon within a field of study.

Neutralize

The process of making something ineffective or harmless by counteracting its effects.

Mono-operation Bias

A form of research bias resulting from using only one method or approach to collect data or measure variables, potentially limiting the validity of findings.

Construct Validity

The extent to which a test measures what it claims to be measuring, ensuring the accuracy of the theoretical concept it intends to reflect.