Which method of determining a firm's net worth divides the market price of the firm's stock by the annual earnings per share, and multiplies this number by the firm's average net income for the past five years?
A) Debt/Equity Method
B) Current Ratio Method
C) Price-Earnings Ratio Method
D) Long-term Asset Method
E) Outstanding Shares Method

Question

Quizplus · Accepted Answer

The Price-Earnings Ratio Method involves dividing the market price of the firm's stock by the annual earnings per share, which is then used to assess the firm's net worth by considering its average net income over a period.

Which Method of Determining a Firm's Net Worth Divides the Market