Question

If a firm has a P/E of 7, and its current price on the stock exchange is R2.10, what is the earnings yield of a single share?
Which of the following firms are more likely to have a high debt- equity ratio? Select more than one: a. One with large amoun
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Answer #1

Answer to part 1

Earnings Yield =Reversal of P/E ratio

=1/(P/E) = 1/7 = 0.142857 = 14.29%

Answer to part 2

High Debt-equity ratio means that major part of the company's growth has been financed through Debt and the company is more risky to lenders and the investors.

The answer to the above question is:- a & b.

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