Which of the following statements is FALSE?
A) You should be willing to pay proportionally more for a share with lower current earnings.
B) The most common valuation multiple is the price-earnings ratio.
C) A firm's price-earnings ratio is equal to the share price divided by its earnings per share.
D) The intuition behind the use of the price-earnings ratio is that when you buy a share, you are in a sense buying the rights to the firm's future earnings, and differences in the scale of firms' earnings are likely to persist.
Correct Answer:
Verified
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