Companies a and c each reported the same earnings per share (eps), but company a's stock trades at a higher price. which of the following statements is correct?

Companies A and C each reported the same earnings per share (EPS), but Company A's stock trades at a higher price. Which of the following statements is CORRECT? Company A trades at a higher P/E ratio. Company A probably has fewer growth opportunities. Company A is probably judged by investors to be riskier. Company A must have a higher market-to-book ratio. Company A must pay a lower dividend.

ANSWER: Company A must have a higher market-to-book ratio.

Explanation:

If companies A and C each reported the same earnings per share (EPS), but company A's stock trades at a higher price then company A must have a higher market-to-book ratio.

This is most likely the case because as the name implies the Market to Book ratio (also known as Price to Book ratio), is a financial ratio that is calculated by comparing a company’s current share price or market value, to its book value.

Whereas EPS is calculated based on number of shares (book value not the market price); therefore 2 companies may have same EPS but their share prices may not be the same.

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