When you are considering two different financing plans, does being at the level where earnings per...
When you are considering two different financing plans, does being at the level where earnings per share are equal between the two plans always mean you are indifferent as to which plan is selected?
Homework Answers
No I will not be indifferent to two projects whose price to earning ratio are similar, I will choose between based on other factors. Those factors are-
1. Debt equity ratio will be given importance and company with lesser debt will be preferred.
2. I will look for future growth projections of the firm, Firm with the better growth trajectory will be preferred.
3. Corporate Governance quality based upon the past performance and any instances of Misstatements in books of accounts.
4. I would also look for other inventory and turnover ratios and look for any credit risks and liquidity of both companies.
So P/E will not be sole factor, I'll look for while selecting between two companies.
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When you are considering two different financing plans, does
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