Empirical evidence indicates a firm will have a low price-earnings ratio if it has

Question

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Empirical evidence indicates that a firm will have a low price-earnings ratio if it has negative transitory or low permanent forecasted earnings. This means that the firm is not performing well in the present or is not expected to perform well in the future, leading to a lower valuation of its stock. Choice A and B both include high or positive forecasted earnings, which would lead to a higher valuation and a higher price-earnings ratio, making them incorrect choices. Choice D includes only permanent earnings, which does not account for transitory fluctuations, and does not give a clear indication of the firm's current or future performance.

Empirical Evidence Indicates a Firm Will Have a Low Price-Earnings