As the market's return on equity increases so will the P/E ratio.

Question

Quizplus · Accepted Answer

The price-to-earnings (P/E) ratio is a valuation metric used to determine how much investors are willing to pay per dollar of earnings generated by a company. A higher P/E ratio indicates that investors are more optimistic about the company's future earnings growth prospects. A company with a higher return on equity (ROE) is typically seen as a more profitable and efficient company, which can lead to higher earnings growth and therefore a higher P/E ratio. Therefore, as the market's return on equity increases, it is likely that the P/E ratio will also increase.

As the Market's Return on Equity Increases So Will the P/E