Which one of these statements is true concerning the price-earnings (PE) ratio?
A)A high PE ratio may indicate that a firm is expected to grow significantly.
B)A PE ratio of 16 indicates that investors are willing to pay $1 for every $16 of current earnings.
C)PE ratios are unaffected by the accounting methods employed by a firm.
D)The PE ratio is classified as a profitability ratio.
E)The PE ratio is a constant value for each firm.

Question

Quizplus · Accepted Answer

A high PE ratio often suggests that investors expect higher earnings growth in the future compared to companies with a lower PE ratio.

Which One of These Statements Is True Concerning the Price-Earnings