Which of the following is NOT a negative attribute of the price-earnings multiple valuation model?
A)It implicitly assumes that comparable firms are already fairly pried in the market place.
B)Its focus on earnings may be clouded by dubious accounting assumptions.
C)It is based on relative market measures rather than book measures.
D)It cannot be used when there are negative earnings.(This would imply a firm value of less than $0!)

Question

Quizplus · Accepted Answer

This statement is actually a positive attribute of the price-earnings multiple valuation model as it relies on market measures rather than book measures which can be influenced by accounting assumptions or manipulation. A, B, and D are all negative attributes of the model.

Which of the Following Is NOT a Negative Attribute of the Price-Earnings