Indicate whether each of the following items is true or false. ________ a) Many successful corporations do not pay dividends to their stockholders.________ b) Careful study of the financial statements will give investors the ability to predict future movements in the market price of a corporation's stock.________ c) The price-earnings (P/E) ratio is computed by dividing the earnings per share by the market price per share.________ d) As a general rule, the higher the P/E ratio, the greater is the optimism for future growth of the corporation.________ e) The number of shares to purchase in order to attain "significant influence" of a corporation can readily be determined from the financial statements.
What will be an ideal response?
a) T b) F c) F d) T e) F
a) This is true. Many corporations retain earnings for future growth rather than pay dividends to stockholders.
b) This is false. While it is useful to study a company's financial statements, they do not necessarily predict future movements in a stock's market price.
c) This is false. The price-earnings ratio is equal to the market price per share divided by earnings per share.
d) This is true. A high price-earnings ratio generally indicates optimism about a company's future growth.
e) This is false. The financial statements indicate the number of issued shares, but they do not indicate how widely held the shares are.
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Sam expressed an interest in buying a painting from Jasper, who claimed that the painting was a family heirloom. Jasper's asking price was $15,000, but Sam was only willing to offer $13,000
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