Investors often apply multiples to earnings per common share and book value per common share in deciding on a reasonable market price for a firm's shares.

Question

Quizplus · Accepted Answer

This statement is true. Multiples such as price-to-earnings (P/E) ratio and price-to-book (P/B) ratio are commonly used by investors in determining the fair market value of a company's shares based on its earnings and book value per common share, respectively.

Investors Often Apply Multiples to Earnings Per Common Share and Book