________ is a guide to the firm's value if it is assumed that investors value the earnings of a given firm in the same way they do the average firm in the industry.

Question

Quizplus · Accepted Answer

The P/E multiple (Price-to-Earnings multiple) is a measure of the value of a company. It's calculated by dividing the company's market value per share by its earnings per share. If investors value the earnings of a given firm the same way they do the average firm in the industry, then the P/E multiple can be used as a guide to the firm's value. This is because the P/E ratio represents what investors are willing to pay for each dollar of earnings of a company, and the industry average provides a benchmark for comparison.

________ Is a Guide to the Firm's Value If It