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Suggest which stock ratio indicates to an investor that the risk related to a stock is high. Provide support for your rationale.
The price-to-earnings ratio (P/E ratio) is calculated as a stock's current share price divided by its earnings per share (EPS) for a twelve-month period (usually the last 12 months, or trailing twelve months (TTM)). [ Most of the P/E ratios you see for publicly-traded stocks are an expression of the stock's current price compared against its previous twelve months' earnings. A stock trading at
$40/share with an EPS (ttm) of $2 would have a P/E of 20 ($40/$2), as would a stock priced at $20/share with an EPS of $1 ($20/$1). These two stocks have the same price-to-earnings valuation - in both cases investors pay $20 for each dollar of earnings. But, what if a stock earning $1 per share was trading at $40/share? Now we'd have a P/E ratio of 40 instead of 20, which means the investor would be paying $40 to claim a mere $1 of earnings. This seems like a bad deal, but there are several factors which could mitigate this apparent overpricing problem. ]
Expert answered|howareyou|Points 135|
Asked 6/1/2013 9:17:07 PM
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Suggest the key factors that should be considered when determining business form and structure. Provide support for your rationale. (Such as a proprietorship, a partnership, and a corporation.)
Weegy: The type of business is a large factor in determining the business structure that is best for a new company. A one-person cleaning service is very different from a large commercial cleaning service. [ Each company performs the same type of service; however, because of the size of each business and the number of clients each business has, they each benefit from a different business structure. Writing a Business Plan If you write a business plan, it will force you to look into the future and focus on where you want to be next year, in five years and 10 years from now. By looking toward the future, you will focus on your goals for the business. The business goals play an important role in determining the business structure that is best for your venture. Financing and Liabilities Another important factor in choosing a business structure is how the business will handle funding, assets and liabilities. Funding a business is easier said than done if you require a small business loan, secured or unsecured loans to operate the business. Furthermore, those funding options then turn into liabilities that must be paid whether or not the business turns a profit. There are business structures that help protect the owner from risk and liability while others leave the owner at more risk to be personally liable for accounts payable. ] (More)
Expert Answered
Asked 6/1/2013 9:07:30 PM
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Create an argument for using a partnership business structure over a corporation. Provide support for your argument.
Weegy: Some of the arguments against having a partner: 1.You will have to share the rewards if the business is successful. 2.You will lose total control over the business, [ particularly if you and your partner have difficulty in making decisions. 3.You will have to share the recognition that will come if the business is successful. 4. A partner can be a disaster if his or her judgment is not good. 5.You run the risk of a falling out and perhaps the necessity of one partner buying the other out if dissention arises. Corporation: A corporation provides limited liability for the investors. Except as indicated below, none of the shareholders in a corporation is obligated for the debts of the corporation; creditors can look only to the corporation's assets for payment. The corporation files its own tax return and pays taxes on its income. If the corporation distributes some of its earnings in the form of dividends, it does not deduct the dividend in computing its taxes, but the shareholder recipients must pay taxes on those dividends even though the corporation has paid taxes on its earnings. A corporation has some tax benefits such as deductibility of health insurance premiums. ] (More)
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Asked 6/1/2013 9:13:29 PM
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