Price earning ratio and price by cash flow ratio are classified as___________?
Correct answer: D. Market value ratios
- A. Marginal ratios
- B. Equity ratios
- C. Return ratios
- D. Market value ratios
Explanation
The price-earnings and price-to-cash-flow ratios relate a company's market price to earnings or cash flow, so they are market value, or market multiple, ratios. Return ratios instead measure profit earned relative to an investment or asset base.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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