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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Definitions:

Place Theory

A theory in hearing that suggests different areas of the basilar membrane respond to different frequencies of sound, thus determining pitch.

Flavor

A complex sensory impression of food or other substances, combining taste, smell, and sometimes texture.

Taste

A sense that allows us to perceive flavors through the interaction of soluble substances with taste buds on the tongue.

Smell

A sense through which odors are perceived, involving the detection of chemical compounds by the olfactory system.