Which One of These Statements Is True Concerning the Price-Earnings

question 89

Multiple Choice

Which one of these statements is true concerning the price-earnings (PE) ratio?

• A)A high PE ratio may indicate that a firm is expected to grow significantly.
• B)A PE ratio of 16 indicates that investors are willing to pay $1 for every $16 of current earnings.
• C)PE ratios are unaffected by the accounting methods employed by a firm.
• D)The PE ratio is classified as a profitability ratio.
• E)The PE ratio is a constant value for each firm.

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