Which of the Following Descriptions of the Price/earnings Ratio Is

question 33

Multiple Choice

Which of the following descriptions of the price/earnings ratio is the most accurate?

• A) Investors are generally more pessimistic about the prospects for high P/E stocks.
• B) Historically, the average P/E for the market has been approximately 10.
• C) Companies with high growth rates generally have higher P/E ratios.
• D) All else the same, investors prefer to purchase stocks with relatively high P/E ratios.

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Definitions:

Empiricism

A theory that states knowledge comes only or primarily from sensory experience.

Knowledge

The understanding, awareness, or familiarity gained through experience or study.

Observation

Observation involves carefully watching, listening, and noting the characteristics or behavior of a subject or phenomenon without direct interaction or manipulation.

Systematic Tests

Systematic tests are structured methods used to evaluate or measure specific characteristics, abilities, or processes in a consistent and standardized manner.