A Higher Price-Earnings Ratio Generally Means That

question 60

Multiple Choice

A higher price-earnings ratio generally means that

• A) investors favour that company and have a high expectation of future profitability.
• B) investors do not expect future profitability.
• C) investors feel the shares are underpriced.
• D) investors will not see growth or expansion.

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Definitions:

Barrier to Entry

Factors that make it difficult for new firms to enter an industry, including high startup costs, stringent regulations, and established brand loyalty.

Homogeneous Product

A good or service that is considered identical or uniform across different sellers, making it difficult to distinguish based on attributes other than price.

Gasoline

A volatile, flammable liquid derived from petroleum, primarily used as fuel in internal combustion engines.

Copper

A reddish-brown metal that is highly conductive to electricity and heat, extensively used in electrical wiring and plumbing.