Companies A and C each reported the same earnings per share (EPS), but Company A's stock trades at a higher price. Which of the following statements is CORRECT?
A) company a trades at a higher p/e ratio.
B) company a probably has fewer growth opportunities.
C) company a is probably judged by investors to be riskier.
D) company a must have a higher market-to-book ratio.
E) company a must pay a lower dividend.

Question

Quizplus · Accepted Answer

Company A must be trading at a higher price-to-earnings (P/E) ratio compared to Company C. The higher P/E ratio for Company A indicates that investors are willing to pay more for each dollar of earnings for Company A, possibly because they perceive it to have better growth prospects or lower risk compared to Company C.

Companies a and C Each Reported the Same Earnings Per