When Analyzing a Price-Earnings Ratio

question 76

Multiple Choice

When analyzing a price-earnings ratio,

• A) A higher price-earnings ratio indicates pessimism because the price is too high compared to the earnings.
• B) The higher the price-earnings ratio, the more investors are paying for earnings.
• C) A low ratio indicates that investors expect higher earnings in the future.
• D) Price-earnings ratios are helpful when comparing two companies in the same industry, but not to the market in general.
• E) The price-earnings ratio alone provides enough information to allow an investor to decide whether to invest in a particular stock.

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Definitions:

Overtime Pay

Additional compensation awarded to employees for hours worked beyond the standard workweek, typically at a higher pay rate than regular hours.

Minimum Wage

The lowest legal hourly pay for workers, established by law to ensure a basic standard of living.

Umbrella Term

A broad, overarching word or phrase used to categorize a wide range of related ideas, concepts, or entities that share common characteristics but may differ in specifics.

Labor Radicals

Individuals or groups advocating for drastic change in labor laws and conditions, often through unconventional or revolutionary means.