A firm has a ROE equal to the industry average but its price to book ratio is below the industry average.You know that the firm's _________.
A) earnings yield is above the industry average
B) P/E ratio is above the industry average
C) dividend payout ratio is too high
D) interest burden must be below the industry average

Question

Quizplus · Accepted Answer

A firm with a ROE equal to the industry average but a lower price to book ratio suggests that the market is valuing its earnings less favorably, leading to a higher earnings yield compared to the industry average.

A Firm Has a ROE Equal to the Industry Average