Question

Which of the following is generally NOT a problem related to the P/E ratio valuation approach?...

Which of the following is generally NOT a problem related to the P/E ratio valuation approach?

P in the P/E ratio is unavailable for publicly traded firms

E can be based on foreign accounting standards

Finding the correct P/E benchmark is often difficult since companies are different

E can be zero or negative

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Answer #1

The following is not a problem generally related to the P/E ratio valuation approach-

P in the P/E ratio is unavailable for publicly traded firms

The P in the P/E ratio stands for the price of the stock. This price is know to everyone for a publicly traded company that is listed on the stock exchange. Hence, knowing the P is not a problem for the use of P/E ratio as a valuation approach for a publicly traded firm.

Please let me know in the comment section in case of any doubt.

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