The Price/earnings Ratio Indicates

question 14

Multiple Choice

The price/earnings ratio indicates

• A)The amount of earnings that a company is willing to pay to shareholders in the form of dividends.
• B)What multiple of current earnings investors are willing to pay for a share of stock.
• C)The net income available to pay out in dividends to shareholders.
• D)The amount of earnings in relation to total assets.

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Definitions:

Enforceable Promise

A commitment in a contract that is legally binding and can be upheld in court.

Substituted Contract

An agreement made to replace a prior contract, which was agreed upon by all original parties and extinguishes the obligations of the first agreement.

Legal Detriment

A loss or disadvantage suffered by a party who acts or refrains from acting in a legal transaction.

Pre-existing Moral Obligation

A duty that arises from moral considerations or societal expectations rather than a legal contract.