Which of the following is most likely to increase a company's P/E ratio?
A) The company announces a new product, which will increase sales and profits.
B) The company's beta increases.
C) The expected inflation rate increases.
D) Interest rates increase for all borrowers.

Question

Quizplus · Accepted Answer

A new product that increases sales and profits can lead to higher expected future earnings, which can increase the P/E ratio as investors are willing to pay more for the company's stock based on its growth prospects.

Which of the Following Is Most Likely to Increase a Company's