The Price-Earnings Ratio Is Calculated by Dividing Earnings Per Share

question 64

True/False

The price-earnings ratio is calculated by dividing earnings per share by the current market price of a share of the company's stock.

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Definitions:

Net Income

The ultimate earnings of a company, arrived at by reducing its revenues by all incurred expenses and taxes.

Nonvoting Preferred Stock

A type of preferred stock that does not grant the holder voting rights at the corporation’s shareholders' meetings.

Long-Term Investment

Investments in bonds, stocks, or real estate held for an extended period to achieve sustained financial growth or income.

Cash Dividend

Funds distributed to a category of shareholders from a corporation's earnings, a decision made by the board of directors, usually provided in cash.