Common valuation multiple is the price-earnings ratio

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Reference no: EM131070540

Which of the following statements is FALSE?

A. The most common valuation multiple is the price-earnings ratio.

B. You should be willing to pay proportionally more for a stock with lower current earnings.

C. A firm's price-earnings ratio is equal to the share price divided by its earnings per share.

D. The intuition behind the use of the price-earnings ratio is that when you buy a stock, you are in a sense buying the rights the firm's future earnings, and differences in the scale of the firms' earnings are likely to persist.

Reference no: EM131070540

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