For potential investors, what question can be answered by market value ratios? Do financial statements contain all of the necessary information to answer this question? Explain in terms of the P/E (price earnings) ratio
What will be an ideal response?
Answer: Market value ratios are often reviewed by potential investors to answer this question: Does the share price of the firm appear reasonable based on its performance? The financial statements do not contain all the necessary information we need. For example, to determine the P/E (price to earnings ratio), we will need to look at the price at which common stock is trading. The current market price of the common stock is not typically available from an income statement, but can be ascertained by checking the exchanges (for publicly traded firms). The P/E also requires the EPS (earnings per share), which is on most income statements.
You might also like to view...
The following information is available for Baxter Manufacturing for April: Actual machine hours 840 Standard machine hours allowed 900 Denominator activity (machine hours) 1,000 Actual fixed overhead costs$3,800 Budgeted fixed overhead costs$4,000 Predetermined overhead rate ($1 variable + $4 fixed)$5 Is the production volume variance for April favorable or unfavorable?
A. Favorable. B. Unfavorable.
The five product levels constitute a ________. At each level more customer value is added
A) product line B) business model C) customer value-hierarchy D) value grid E) demand chain
Scheduling personnel is an example of an operations management
A. organizational strategy. B. functional strategy. C. operational decision. D. mission implementation. E. tactical decision.
Ed wants to give Howard his old car, but Howard says he doesn't want it. Howard later reconsiders and tells Ed he does want the car. His previous repudiation means there is no gift, and Howard has no rights in the car
Indicate whether the statement is true or false