TB 13-80 Company X has a P/E ratio of 16 in year 2017.Company X has a P/E ratio of 16 in year 2017 and 16.5 in 2018. In 2018 its P/E ratio is 24. The best way to interpret these data is toconclude that the shares have great growth capacity and should be bought.the shares are under-priced and should be bought.other financial results and news should be examined to determine the cause of the P/E ratio change.the shares are overpriced and should be sold.

The ratio that assists the investors to determine the worth of the stock in the market in comparison…

Answered: Company X has a P/E ratio of 16 in year…

Company X has a P/E ratio of 16 in year 2017 and 16.5 in 2018. In 2018 its P/E ratio is 24. The best way to interpret these data is to conclude that

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

TB 13-80 Company X has a P/E ratio of 16 in year 2017.
Company X has a P/E ratio of 16 in year 2017 and 16.5 in 2018. In 2018 its P/E ratio is 24. The best way to interpret these data is to
conclude that

the shares have great growth capacity and should be bought.
the shares are under-priced and should be bought.
other financial results and news should be examined to determine the cause of the P/E ratio change.
the shares are overpriced and should be sold.

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