The price/earnings (P/E)ratio tells us how much investors are willing to pay for a dollar of current earnings.In general,investors regard companies with higher P/E ratios as being less risky and/or more likely to enjoy higher growth in the future.

Question

Quizplus · Accepted Answer

This is a correct statement. Generally, companies with higher P/E ratios are seen as more attractive to investors due to the expectation of future growth potential. However, a high P/E ratio can also indicate that the stock is overvalued and may not necessarily indicate a better investment opportunity.

The Price/earnings (P/E)ratio Tells Us How Much Investors Are Willing