Homework Answers
1: Option 2
1: False since price is changing, the PE ratio is also constantly changing.
2: True: PE Ratio indicates the price payable per dollar of earnings.
3: FALSE: High PE Ratio means the firm is overvalued
4: False: Accounting methods affect the EPS and thereby the PE Ratio.
5: False: PE ratio is a price ratio
2: True
Benchmarking allows the managers to have a target in mind while trend analysis allows them to understand if the ratio trends are rising or falling.
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