What Does a Low P/E for a Stock Indicate

question 122

Multiple Choice

What does a low P/E for a stock indicate?

• A) People may expect earnings to fall in the future perhaps because the firm will be faced with increased competition.
• B) Its dividends have been low so that no one is willing to pay very much for it.
• C) The corporation is possibly overvalued.
• D) It is always a good time for buying the company's stock.

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Definitions:

Quota Rent

The extra profit that producers can make when supply is artificially restricted by an import quota.

Demand Price

The highest price that consumers are willing to pay for a good or service at a given quantity.

Supply Price

The lowest price at which a seller is willing to sell a good or service, influenced by costs of production and market demand.

Quota Rent

The earnings exceeding normal profits received by license holders when import quotas are in place.