The price earnings 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 ratio and price-to-cash-flow ratio use the market price of a company's equity, so they are market value ratios. Return ratios instead measure earnings or returns relative to an investment base.
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About Business Finance
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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