In Relation to the Price-Earnings Ratio (P/E Ratio), Which Statement

question 51

Multiple Choice

In relation to the price-earnings ratio (P/E ratio) , which statement is incorrect?

• A) It measures how much investors are willing to pay for each dollar of earnings.
• B) Higher P/E ratios tend to be associated with growth companies.
• C) A P/E ratio of 9.1 means that the shares of the company are selling at 9.1 times current profits.
• D) As expectations of future profits increase the P/E ratio tends to fall.

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Definitions:

Single Purpose

Designed or intended to fulfill only one specific function or task, without deviation or multipurpose utility.

Two-Party System

A political system dominated by two major parties, often limiting the presence or success of smaller or third parties.

Legislative Chamber

A formal assembly or room where a legislature meets to discuss and make laws.

Majority

The greater part or number; the number of votes, seats, or individuals in a group that is more than half of the total count.