The Price to Earnings Ratio,also Called the P/E Ratio of a Stock

question 58

Multiple Choice

The price to earnings ratio,also called the P/E ratio of a stock is a measure of the price of a share relative to the annual net income per share earned by the firm.Suppose the P/Es for a firm's common stock during the past four quarters be 10,12,15,and 11,respectively.The standard deviation of the P/E ratio over the four quarters is:

• A)1.87
• B)2.16
• C)3.50
• D)4.67

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Definitions:

Matching Concept

An accounting principle that requires the expenses to be matched with the revenues they helped to generate in the same accounting period.

Cash Is Received

The acquisition of monetary funds through various means, such as sales, financing, or donations.

Accrued

Refers to amounts that are recognized in the financial statements before the cash transactions occur, representing liabilities for goods and services received but not yet paid.

Routine Entry

Repeated and standard accounting entries made for recurring transactions within a business's financial records.