Which of the following ratios indicate how much investors are willing to pay for the firm's stock for each dollar of reported profits?
A) Earnings per share ratio
B) Market/book ratio
C) Price/earnings ratio
D) Return on equity ratio
E) Net profit margin ratio

Question

Quizplus · Accepted Answer

Price/earnings ratio (P/E ratio) indicates how much investors are willing to pay for each dollar of reported profits. It is calculated by dividing the current market price per share by the earnings per share (EPS) for the most recent fiscal year or quarter. A higher P/E ratio indicates that investors are willing to pay more for each dollar of earnings, which may imply higher growth prospects or a strong market position for the company.

Which of the Following Ratios Indicate How Much Investors Are