McDonald's Stock Currently Sells for $123

question 78

Multiple Choice

McDonald's stock currently sells for $123. It's expected earnings per share are $5.12. The average P/E ratio for the industry is 24. If investors expected the same growth rate and risk for McDonald's as for an average firm in the same industry, it's stock price would

• A) stay about the same.
• B) rise.
• C) fall.
• D) there is not enough information.

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Definitions:

Liquidity

The simplicity of transforming an asset into cash without impacting its market value.

Profitability

A measure of the efficiency and financial success of a company, typically evaluated through ratios such as net profit margin or return on investment.

Required Reserves

The portion of deposits that banks are required to keep on hand and cannot lend out, typically mandated by a central bank.

Total Assets

The sum of all assets owned by an entity, including cash, investments, property, and other valuables, used to assess financial health.