The price/earnings ratio measures the amount common stock investors are willing to pay for each dollar of the firm's earnings.

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The price/earnings ratio (P/E ratio) is the current market price of a company's stock divided by its earnings per share (EPS) over the past 12 months. It is a valuation ratio that indicates how much investors are willing to pay for each dollar of the company's earnings. A high P/E ratio can indicate that investors are optimistic about the company's future growth potential, while a low P/E ratio may signify that investors are more cautious or uncertain about the company's prospects.

The Price/earnings Ratio Measures the Amount Common Stock Investors Are