Companies A and C each reported the same earnings per share (EPS), but Company A's stock trades at a higher price.Which of the following statements is CORRECT?
A) Company A trades at a higher P/E ratio.
B) Company A probably has fewer growth opportunities.
C) Company A is probably judged by investors to be riskier.
D) Company A must have a higher market-to-book ratio.
E) Company A must pay a lower dividend.

Question

Quizplus · Accepted Answer

A higher stock price relative to the EPS indicates that investors are willing to pay more for each dollar of earnings, which implies a higher P/E ratio. This could be due to a variety of reasons, such as strong growth potential or perceived lower risk. However, the information provided does not give enough information to determine the reason for the discrepancy in stock prices.

Companies a and C Each Reported the Same Earnings Per