Which of the following is not a concern when estimating P/E ratios and future EPS?
A) The P/E ratio may be highly variable across an industry.
B) The P/E ratio can be difficult to compute and not readily available.
C) The volatile nature of earnings implies a great deal of volatility in P/E multiples.
D) The P/E ratio is uninformative when companies have negative or very small earnings.
E) Net income, and hence earnings per share, are susceptible to the influence of accounting choices and earnings management.
Correct Answer:
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