Company X Has a P/E Ratio of 16 in Year

question 61

Multiple Choice

Company X has a P/E ratio of 16 in year 2017 and 16.5 in 2018.In 2018 its P/E ratio is 24.The best way to interpret these data is to conclude that:

• A)the shares are overpriced and should be sold.
• B)the shares have great growth capacity and should be bought.
• C)other financial results and news should be examined to determine the cause of the P/E ratio change.
• D)the shares are under-priced and should be bought.

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Definitions:

Odds

A measure of the likelihood of a particular outcome in a situation or event.

Prevent

To take measures in advance to ensure something undesirable does not happen.

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