Which of the following normally does not introduce measurement error into the calculation of P/E ratios?
A) differences in firm specific growth rates
B) restructuring losses
C) transitory gains
D) deferred taxes

Question

Quizplus · Accepted Answer

Deferred taxes do not introduce measurement error into the calculation of P/E ratios because they are a non-cash expense and do not affect the earnings of the company. In contrast, firm-specific growth rates, restructuring losses, and transitory gains can all affect the earnings of the company and introduce measurement error into the P/E ratio calculation.

Which of the Following Normally Does Not Introduce Measurement Error