The P/E ratio that is based on a firm's financial statements and reported in the newspaper stock listings is different from the P/E ratio derived from the dividend discount model (DDM) because

A) the DDM uses a different price in the numerator.
B) the DDM uses different earnings measures in the denominator.
C) the prices reported are not accurate.
D) the people who construct the ratio from financial statements have inside information.
E) They are not different-this is a "trick" question.

P/E Ratio

Stands for Price-to-Earnings Ratio, which measures a company's current share price relative to its per-share earnings, often used to gauge valuation.

Dividend Discount Model

A method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value.

Financial Statements

Papers that offer a summary of a company's financial status, encompassing the balance sheet, income statement, and cash flow statement.