A higher price-earnings ratio generally means that
A) investors favour that company and have a high expectation of future profitability.
B) investors do not expect future profitability.
C) investors feel the shares are underpriced.
D) investors will not see growth or expansion.

Question

Quizplus · Accepted Answer

A higher price-earnings ratio indicates that investors have a favorable view of the company and expect higher future earnings, which justifies a higher stock price relative to current earnings.

A Higher Price-Earnings Ratio Generally Means That