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The P/E Ratio is not useful when the Firm's ................ are negative . In this case...

The P/E Ratio is not useful when the Firm's ................ are negative . In this case \, It is common to look at the firm's .................. relative to sales.

A. Operating earning ;Enterprise value

B.Net earnings;Enterprise value

C. Operating earning ;Market value

D. Net earnings;Market value

Which one is correct

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Answer #1

Answers :

B) Net Earnings; Enterprise value

The firm with a Negative Net income will generate Negative EPS.It indicates that stockholders are losing their money in the Business. At this Situation, calculation of PE Ratio ( Market Price / EPS) is Not Useful to derive any meaningful inferences. Instead of using the PE ratio, generate the EnterpriseValue rative to sales to help the Investors and stockholders for their decisions.   

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