Consult Professional Help to Deal with Problems of Price/Earnings Ratio
Price/earnings ratio is a great measure to compute financial health of a company. However, we are well aware of issues faced during process of computing. The problems often pose a challenge for investors as well as students ascertaining their task of ascertaining financial condition of a company. Myhomeworkhelp.com has worked on issue and has come up with problems with price/earnings ratio assignment help.
The price/earnings ratio is widely accepted tools and measure for valuing stock market, however, flaws draw more attention of the investors. Some institutional investors and wizards are of late compelling us shift our focus on problems in-built in the method of price/earnings ratio.
Let’s go ahead discussing in detail issues we address in our problems with price/earnings ratio homework help.
Too simplistic assumption in-built in the method
- The biggest flaw we consider is simplistic assumptions we consider during computation.
- We consciously choose to ignore certain significant variables that affect financial health of company.
- A simple division of current prices by recent earnings does not consider the implicit factors that affect the overall balance sheet of the company.
The computation does not take cognizance of the growth factor
- The world wide accepted method of price/earnings ratio does not take into cognizance the growth factor of the company.
- This result in older matured stocks appears cheaper due to the simplistic calculation.
- Institutional investors and some individual investors with thorough knowledge of stock market do not wish to exclude the growth factor while ascertaining the value of the stock.
- This makes the price/earnings ratio less lucrative a method for wizards.
Investors consider it as a regressive method of calculation
- A regressive method cannot, in fact, bring out the correct aspect of the financial health of a company.
- In an economic scenario plagued by uncertainties, a regressive method of using recent full year’s number is of little significance.
- Seldom can they lead to correct
We do not consider the quality of earnings as suggested by problems with price/earnings ratio homework help
- A company has the ability to inflate their earnings and make them look lucrative to investors.
- Banks and certain organizations continue to inflate their earnings as investors keep on focusing on the price/earnings method as only source of calculation.
- Shifting the focus to other areas in balance sheet will reveal the aspect of inflated earnings.
- This will help the investor take a wise decision in regard to
Price does not take into account the debt factor
- Price in price/earnings ratio does not consider implicit debt factor as suggested by problems with price/earnings ratio assignment help.
- Any company with huge debt is not lucrative as an investment destination.
- Excess debt is a serious problem that must be viewed in proper light in order to invest wisely.
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