In general,if investors regard a company as being relatively risky and/or having relatively poor growth prospects,then it will have relatively high P/E and M/B ratios.

Question

Quizplus · Accepted Answer

If investors perceive a company as risky and/or with poor growth prospects, they will typically demand a higher rate of return, resulting in lower P/E and M/B ratios. Therefore, if a company has high P/E and M/B ratios, it may indicate that investors see it as relatively safe with strong growth potential.

In General,if Investors Regard a Company as Being Relatively Risky