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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