Which of the Following Statements Is FALSE

question 15

Multiple Choice

Which of the following statements is FALSE?

• A) The most common valuation multiple is the price-earnings ratio.
• B) You should be willing to pay proportionally more for a stock with lower current earnings.
• C) A firm's price-earnings ratio is equal to the share price divided by its earnings per share.
• D) The intuition behind the use of the price-earnings ratio is that when you buy a stock, you are in a sense buying the rights to the firm's future earnings, and differences in the scale of firms' earnings are likely to persist.

---

Definitions:

Sharpe Ratio

A measure used to evaluate the risk-adjusted return of an investment portfolio.

Standard Deviation

A statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance.

Inflation

A general increase in prices and fall in the purchasing value of money over time.

Taxes

Mandatory financial charges or levies imposed by governments on individuals or entities to fund government spending and various public expenditures.