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.

Understand the perceptual process in organizational contexts, including the steps from selection to response.

Understand the concept of perceptual process and its steps.

Acknowledge the influence of cultural differences on perception and behavior.

Identify factors influencing perceptual selection including external and internal factors.