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32.) What type of financial option positions would a CFO enter into for additional income potential...

32.) What type of financial option positions would a CFO enter into for additional income potential on his or her corporation’s balance sheet?

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Answer #1

Companies tend to keep the investors and shareholders happy by portraying that the company is doing good and has good earning potential. Earning potential of the company projects the probable gains which the company may witness in future. This potential gain, once realized, is transferred to the shareholders in the form of dividends. The CFO reflects this earning potential with the help of P/E ratio. P/E ratio is price to earnings ratio. The higher the value of this ratio, the more attractive company becomes to the investors as the earning potential is higher. Hence the P/E ratio helps the company to maintain hope in the minds of the investors and make them retain the company’s stocks and shares.

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