What is the key difference between historical PER and prospective PER?
A) Prospective PER uses next year's share price; historical PER uses last year's price.
B) Prospective PER uses last year's earnings and the current share price; historical PER uses next year's earnings and the current share price.
C) Prospective PER uses next year's earnings and next year's price; historical PER uses last year's earnings and last year's price.
D) Prospective PER uses next year's earnings and the current share price; historical PER uses last year's earnings and the current share price.

Question

Quizplus · Accepted Answer

Prospective PER (Price to Earnings Ratio) is calculated using the forecasted earnings for the next year along with the current share price, whereas historical PER uses the earnings from the previous year and the current share price. This distinction allows investors to evaluate a company's valuation based on past performance versus future potential.

What Is the Key Difference Between Historical PER and Prospective