Which of the following statements is CORRECT?
A)If Firms X and Y have the same P/E ratios, then their market-to-book ratios must also be the same.
B)If Firms X and Y have the same net income, number of shares outstanding, and price per share, then their P/E ratios must also be the same.
C)If Firms X and Y have the same earnings per share and market-to-book ratio, they must have the same price earnings ratio.
D)If Firm X's P/E ratio exceeds that of Firm Y, then Y is likely to be less risky and also to be expected to grow at a faster rate.
E)If Firms X and Y have the same net income, number of shares outstanding, and price per share, then their market-to-book ratios must also be the same.

Question

Quizplus · Accepted Answer

If Firms X and Y have the same net income, number of shares outstanding, and price per share, then their P/E ratios must also be the same because P/E ratio is calculated as price per share divided by earnings per share, and both firms have the same values for these variables.

Which of the Following Statements Is CORRECT