In Relation to the Price-Earnings Ratio (P/E Ratio), Which Statement

question 44

Multiple Choice

In relation to the price-earnings ratio (P/E ratio) , which statement is incorrect?

• A) Higher P/E ratios tend to be associated with growth companies.
• B) As expectations of future profits increase the P/E ratio tends to fall.
• C) It measures how much investors are willing to pay for each dollar of earnings.
• D) A P/E ratio of 5.2 means that the shares of the company are selling at 5.2 times current profits.

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Definitions:

Conscious Awareness

Being mentally alert and having knowledge of one's own thoughts, feelings, and sensations at a given moment.

Perceptual Adaptation

The ability of the body to adjust to an environment by filtering out distractions and focusing on important elements.

Retinal Disparity

The slight difference in the visual images that reach each eye, leading to the perception of depth and three-dimensional structure.

Interposition

A visual cue for depth perception, where one object partly covers another, indicating the former is closer to the observer.