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    Company's worth based on sales and equity returns

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    Company A B

    Return on sales 5% 14%
    Return on Equity 22% 16%

    Which company would be better to own if the price earnings ratios were equal.

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    Solution Preview

    Price Earnings Ratio
    The relationship between the market price of a share of stock and the stock's current earnings per share is often stated in terms of a price-earnings ratio. The ...

    Solution Summary

    This solution discusses price earnings ratios.