A conservative rule of thumb is to establish a business's worth as ________ the firm's current annual profit.
A) twice
B) three times
C) five times
D) ten times
E) fifteen times

Question

Quizplus · Accepted Answer

The conservative rule of thumb to establish a business's worth is to determine it as five times the firm's current annual profit. This is known as the price-to-earnings ratio (P/E ratio). However, it is important to note that other factors, such as growth potential and industry competition, should also be considered in determining a business's worth.

A Conservative Rule of Thumb Is to Establish a Business's