Which of the following statements is FALSE?
A)The most common valuation multiple is the price-earnings (P/E)ratio.
B)You should be willing to pay proportionally more for a stock with lower current earnings.
C)A firm's P/E ratio is equal to the share price divided by its earnings per share.
D)The intuition behind the use of the P/E 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 the firms' earnings are likely to persist.

Question

Quizplus · Accepted Answer

The statement "You should be willing to pay proportionally more for a stock with lower current earnings" is false. In reality, investors typically look for stocks with stronger current earnings and growth potential, and are willing to pay more for these stocks.

Which of the Following Statements Is FALSE