Which of the following statements is FALSE?
A)We can estimate the value of a firm's shares by multiplying its current earnings per share by the average P/E ratio of comparable firms.
B)For valuation purposes,the trailing P/E ratio is generally preferred,since it is based on actual not expected earnings.
C)Forward earnings are the expected earnings over the coming 12 months.
D)Trailing earnings are the earnings over the previous 12 months.

Question

Quizplus · Accepted Answer

For valuation purposes, the forward P/E ratio is generally preferred since it is based on expected earnings which gives a better indication of the company's future potential. The trailing P/E ratio reflects past performance which may not be indicative of future performance. Therefore, statement B is false. The other statements are true.

Which of the Following Statements Is FALSE