In your own words, no plagiarism, provide a 200-300 word explanation for the two related questions involved in business financial statements:
1. Discuss how risk and profitability factors cause differences in price-earnings ratios across firms. Explain the difference between abnormal and normal earnings.
2. A firm's value-to-book and market-to-book ratios may differ from one for a number of reasons. Discuss how a successful internally funded research and development program would create a situation where the value-to-book and market-to-book ratios differ from one.