Advantages of using P/E Ratio
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Which one of the statements are advantages of using the price/earnings (P/E) ratio to value a firm?
I. Using P/E ratio is based on reliable audited financial reporting numbers
II. Using P/E ratio is a commonly accepted methodology in the stock market
III. Using P/E ratio capitalizes on stock market efficiency
IV. Using P/E ratio allows comparisons to comparable investments
a. I b. I and II c. I,II and III d. I, II and IV e. I, II, III and IV
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Solution Summary
The Solution identifies which one of the statements correctly identifies an advantage of using the P/E ratio.
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