Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Price-Earnings Ratio (PE Ratio)

Financial Accounting

14. Financial Statement Analysis

Ratios: Price-Earnings Ratio (PE Ratio)

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Multiple Choice

Which of the following factors is most likely to influence a company's price-earnings (P/E) ratio?

The company's total number of employees

The physical location of the company's headquarters

Investor expectations about future earnings growth

The company's inventory turnover ratio

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Understand the concept of the Price-Earnings (P/E) ratio: The P/E ratio is a valuation metric that compares a company's current share price to its earnings per share (EPS). It is often used by investors to assess the relative value of a company's stock and its growth potential.

Identify the factors that influence the P/E ratio: The P/E ratio is primarily influenced by investor expectations about the company's future earnings growth, as higher expected growth typically leads to a higher P/E ratio. Other factors, such as market conditions and industry trends, may also play a role.

Evaluate the options provided in the problem: Consider each factor listed (total number of employees, physical location of headquarters, inventory turnover ratio, and investor expectations about future earnings growth) and determine their relevance to the P/E ratio.

Focus on investor expectations about future earnings growth: This factor is most directly related to the P/E ratio because it reflects how optimistic investors are about the company's ability to generate higher earnings in the future.

Conclude that the correct answer is investor expectations about future earnings growth: This is the factor most likely to influence a company's P/E ratio, as it directly impacts how the market values the company's stock relative to its earnings.