Which of the following statements about the price/earnings ratio is false?
A. The price/earnings ratio is a constant relationship for most companies.
B. A high price/earnings ratio indicates investors have high confidence in the future
potential of the company.
C. It is more useful to compare a company’s price/earnings ratio to a competitor’s ratio
or the industry average ratio.
D. The price/earnings ratio is computed by dividing the market price of stock by the
earnings per share
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