Question

Bilori Paul Nelearn sessments > Exam 1: Chapters 1-3 Sept 25 10am - Midnight Question 4 Not yet answered Marked out of 4.00 P Flag question P/E (Price / Earnings) When comparing an emerging company (e.g. Tesla) to an established company (e.g. Disney), we would expect a multiple or valuation a. lower O b. higher O c. we can't compare the two using P/E O d. same Previous page Next pag o BI 7:14 PM 9/25/2020 . 199 99- hp

Answer 1

Correct Answer:

Option c: We can’t compare the two using P/E.

Explanation:

We cannot compare the corporate income (earnings) of two different industries as every industry has different dynamics.

Generally, P/E ratio is used to compare P/E ratio of companies in the same industry or to past P/E ratio of same company.

Since Disney and Tesla are not in the same industry, we cannot compare the P/E ratio of the two companies.

End of Answer.

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