Which of the following statements regardingthe PE ratio is true?O A high PE ratio is indicative of a company withquestionable future earnings.The higher the PE ratio the greater the risk.O A low PE ratio reflects a company with a strongfinancial future.O The lower the PE ratio the greater the risk.

The Price Earnings Ratio (PE Ratio) is the ratio of the market price of a share to its earnings. In…

Answered: Which of the following statements…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

The market-to-book ratio is the ratio of a firm that reports negative retained earnings on its equity statement is less than one (i.e, market value of equity is less than book value of equity) True OR False
what happens if a company doesn't manage risk ?
Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile? ... O A. They do not tell how the decision affects the firm's reported profits from an accounting perspective. O B. They are not easily predicted from historical financial statements of a firm and its competitors. O C. They do not show how the firm's earnings are expected to change as the result of a particular decision. O D. These earnings are not actual cash flows.
Funding risk is the risk that a firm will not be able to meet its short-term financial obligations when due. Select one: True False
11. Which of the following security holders receives a lower returns with low risk? . T-Bill B. Common shareholders C. Stakeholders D. Creditors 12. The advantage of a company compared a sole trader as form of business organisation is: A. Quick decision making B. Access to external professional management skills C. Use of own funds D. Inability to access external funds Thank you!!!
Financial Leverage: a.can impact profitability. b.increases when stock is issued. c.is a sign of financial weakness. d.All of the above. e.None of the above.
investors would normally prefer the firm to have a higher dividends coverage ratio :Select one True False
4. What forms of market efficiency are violated if investors overreact to good news, resulting in stock price increases followed by stock price decreases: a. Semi-strong form efficiency b. Strong-form efficiency c. Both 1 and 2 d. Neither 1 nor 2
The PE ratio is a very common method used by investors to get a quick calculation on the market’s perception of a company. Evaluate the formula used to calculate the PE ratio focusing on the limitations of this method of valuation?
CHOICES A. Only Statement I is correctB. Only Statement II is falseC. Statements II and III are falseD. Only Statement III is falseE. All statements are correct
It is common for a financially healthy company to have a negative net working capital. True False
Which of the following is NOT an acceptable basis on which to measure an expense? A cash outflow. O A pro rata measure. O An estimation. O All of these options are acceptable. O An invoice price. Which of the following is a likely explanation as to why preparers would choose to deliberately understate the reported profit of a listed entity? O To reduce investors' expectations of future earnings. O To decrease the entity's weighted average cost of capital. To reduce the entity's tax liability. O To satisfy the qualitative characteristic of faithful representation. O All of these are likely explanations why preparers would deliberately understate the reported profit.

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