Which ratio gives an indication of how the market values an entity's earnings?
A)Return on equity
B)Price-to-earnings ratio
C)Dividend earnings ratio
D)Earnings per share

Question

Quizplus · Accepted Answer

The price-to-earnings ratio (P/E ratio) is a financial ratio used to measure the relative value of an entity's earnings. It is calculated by dividing the current market price per share by the earnings per share. A high P/E ratio indicates that the market is willing to pay a higher price for the entity's earnings, and vice versa. Therefore, the P/E ratio can give an indication of how the market values an entity's earnings.

Which Ratio Gives an Indication of How the Market Values