If a firm's price-earnings ratio is relatively low, then it might be an indication that
A)the demand for the stock is relatively high.
B)the supply of the stock is relatively low.
C)people expect the firm's earnings to rise.
D)people expect the firm's earnings to fall.

Question

Quizplus · Accepted Answer

A low price-earnings ratio often suggests that investors expect the firm's future earnings to decline, leading to a lower valuation of the stock.

If a Firm's Price-Earnings Ratio Is Relatively Low, Then It