Respuesta :
Answer:
Companies A and C each reported the same earnings per share (EPS), but Company A's stock trades at a higher price. Which of the following statements is CORRECT? Company A trades at a higher P/E ratio. Company A probably has fewer growth opportunities. Company A is probably judged by investors to be riskier. Company A must have a higher market-to-book ratio. Company A must pay a lower dividend.
ANSWER: Company A must have a higher market-to-book ratio.
Explanation:
If companies A and C each reported the same earnings per share (EPS), but company A's stock trades at a higher price then company A must have a higher market-to-book ratio.
This is most likely the case because as the name implies the Market to Book ratio (also known as Price to Book ratio), is a financial ratio that is calculated by comparing a company’s current share price or market value, to its book value.
Whereas EPS is calculated based on number of shares (book value not the market price); therefore 2 companies may have same EPS but their share prices may not be the same.
