Which of the Following Statements Is True About the Price

question 7

Multiple Choice

Which of the following statements is true about the price earnings (P/E) ratio?

• A) A high P/E ratio indicates investors have little confidence in the future profit potential of the company.
• B) The P/E ratio could be used to approximate the value investors would be willing to pay for the company's acquisition from existing owners.
• C) It is a ratio of importance to creditors.
• D) The P/E ratio increases as profit increases.

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Definitions:

Section 5

A reference that needs context for accurate definition, often related to specific laws or regulations depending on the document it is cited in.

Registered Offering

A securities offering that has been registered with the Securities and Exchange Commission, making it available to the public.

Prospective Investors

Individuals or entities that are potentially interested in investing in a particular security, property, or business opportunity but have not yet committed to the investment.

Post-Effective Period

The time after a regulatory document, such as a registration statement with the SEC, becomes effective, allowing for the actual offer and sale of securities.