What does the P/E ratio measure?
A)The value that the stock market places on a company's earnings and growth prospects.
B)The relationship between dividends and market prices.
C)The earnings for one common share of stock.
D)The future prospects of the company.

Question

Quizplus · Accepted Answer

The P/E (price-to-earnings) ratio measures the value that the stock market places on a company's earnings and growth prospects. It is calculated by dividing the market price per share by the company's earnings per share. A high P/E ratio indicates that investors expect growth in the future, while a low P/E ratio may indicate that a company is undervalued.

What Does the P/E Ratio Measure