Which of the following is true regarding the price-earnings ratio?
A)price-earnings ratio = market price per share/earnings per share
B)tables of stock prices and financial periodicals often present price-earnings ratios
C)P/E ratios should use normal, ongoing earnings data in the denominator
D)the analyst must interpret the published P/E ratios cautiously if the firm's net income includes unusual, nonrecurring gains and losses
E)all of the above

Question

Quizplus · Accepted Answer

All of the statements are true. The price-earnings ratio is calculated by dividing the market price per share by earnings per share. Tables of stock prices and financial periodicals commonly provide price-earnings ratios. The denominator in P/E ratios should use normal, ongoing earnings data, and the analyst must be cautious while interpreting published P/E ratios if the firm's net income incorporates unusual, nonrecurring gains and losses.

Which of the Following Is True Regarding the Price-Earnings Ratio