Companies a and C Each Reported the Same Earnings Per

question 75

Multiple Choice

Companies A and C each reported the same earnings per share (EPS) , but Company A's stock trades at a higher price.Which of the following statements is CORRECT?

• A) Company A trades at a higher P/E ratio.
• B) Company A probably has fewer growth opportunities.
• C) Company A is probably judged by investors to be riskier.
• D) Company A must have a higher market-to-book ratio.
• E) Company A must pay a lower dividend.

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Definitions:

Outboard Motors

Outboard motors are a type of propulsion system for boats, typically mounted on the outside of the hull, used to steer and power a vessel.

Opportunity Cost

The advantages that a person, investor, or company forfeits when they opt for one option instead of another.

Outboard Motors

Engines mounted on the outside of the stern of a boat, used to propel the vessel through the water.

Opportunity Cost

The cost of forgone alternatives when one option is chosen over another.