CFA Practice Question

There are 356 practice questions for this topic.

CFA Practice Question

Select the correct statement(s).

I. The less a firm is able to pass inflation through its earnings, the more it is penalized.
II. Inflation has no effect on the P/E ratio of a company if it can completely pass inflation through its earnings.
III. If a firm cannot completely pass inflation through its earnings, then the higher the inflation rate, the more severe the influence on the stock price.
A. I and III
B. I and II
C. I, II and III
Explanation: The higher the inflation flow-through rate, the higher the P/E ratio. A company is penalized if it cannot pass inflation through its earnings.

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