For a given share price of a firm's stock, the lower the EPS the lower the price-earnings ratio.

Question

Quizplus · Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the market value per share by the earnings per share (EPS). Therefore, the lower the EPS, the higher the P/E ratio (assuming the market value per share remains constant). This is because investors are willing to pay more for each dollar of earnings when the EPS is lower. So, the statement is false.

For a Given Share Price of a Firm's Stock, the Lower