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Basic Question 1 of 11
The P/E ratios of most U.S. companies fall into which of the following categories?
B. 10-20
C. 20-30
D. 30-40
E. 40-50
A. 0-10
B. 10-20
C. 20-30
D. 30-40
E. 40-50
User Contributed Comments 14
| User | Comment |
|---|---|
| DannyZhou | How would I know this? Wild guess? Or is it supposed to be common knowledge? |
| raymondg | Its common knowledge |
| DS12 | It is mentioned in the book. |
| acemaj | Both. |
| johntan1979 | Don't be ignorant. You want to be a CFA, so by right you should know these things! |
| gill15 | It's a pretty valid question. If I'm writing this exam I would want to know where to get this type of information so I could get it right. And Yeah its in the text] |
| kritan | johntan; and you should know you that one never IS a CFA, but a CFA charterholder... |
| farhan92 | B or C make the most sense (without reading the book) |
| Teeto | One can think in terms of required return on equity. 5%-10% (or P/E 10-20) is the most reasonable one. |
| houstcarr | question was actually referring to US companies in general, which do not trade in that range on average. but if referring to the large caps, then yes. take a look at pink sheets |
| Inaganti6 | Lol John Tan you need to brush up on VII of ethics |
| Logaritmus | Nowadays 20-30 is a P/E ratio for most US Stocks (thanks to negative real interest rates). On the other hand, if interest rates are higher you'll most likely have lower P/E ratio i.e. in Emerging Markets (Turkey, Russia) most companies now have P/E < 10. |
| sshetty2 | AN is trying to say that we should be reading the textbook and not relying solely on their study notes; which is something i have not been doing ffs. |
| pigletin | you should know this fact. but it will never be tested in cfa exam |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables
calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value
CFA® 2024 Level I Curriculum, Volume 3, Module 8.