A high P/E ratio indicates that ________.
A)a company is highly profitable
B)investors believe that a company has the potential for significant growth
C)the company paid a large dividend compared with its earnings per share
D)a company has high earnings per share

Question

Quizplus · Accepted Answer

A high P/E ratio indicates that investors have high expectations for the future growth of the company, which is why they are willing to pay a premium for its current earnings. A high P/E ratio does not necessarily mean that the company is highly profitable or pays a large dividend, but it does indicate that investors believe in the company's potential for future earnings growth.

A High P/E Ratio Indicates That ________