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:

Industrial Psychology

The scientific study of human behavior in the workplace and applies psychological theories and principles to organizations.

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This landmark piece of legislation in the United States outlawed discrimination based on race, color, religion, sex, or national origin, significantly influencing the country's civil rights movement.

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