The Price/earnings Ratio

question 10

Multiple Choice

The price/earnings ratio:

• A)is a measure of the relative expensiveness of a firm's common stock.
• B)does not usually change by more than 1.0 during the year.
• C)can be used to determine the cash dividend to be received during the year.
• D)is calculated by dividing the earnings multiple by net income.

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Definitions:

EPS

A financial ratio indicating how much money a company makes for each share of its stock, also known as earnings per share.

EBIT

A financial metric used to evaluate a company's operating performance by calculating its profit without the effects of financing and tax expenses.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure used to analyze and compare profitability between companies and industries.

Operating Net Cash Flow

The amount of cash generated by a company’s normal business operations over a specific period.