Which of the following statements concerning the price-to-earnings (PE)ratio is NOT true?
A) The PE ratio is calculated as: (current market price per share)/ (dividend payout ratio).
B) High-PE companies are those that are popular.
C) The PE ratio compares present performance with expectations of future performance.
D) A company with a low price PE ratio is expected to show reduced future performance.

Question

Quizplus · Accepted Answer

The PE ratio is not calculated using the dividend payout ratio, but rather by dividing the current market price per share by the earnings per share (EPS). The formula is: PE Ratio = (Market Price per Share) / (Earnings per Share).

Which of the Following Statements Concerning the Price-To-Earnings (PE)ratio Is