The PEG ratio
A) preferred by investors is equal to 2.0 or higher.
B) compares the price/earnings ratio to the rate of growth of the company's earnings.
C) is a measure of a firm's liquidity.
D) measures the ability of a firm's assets to generate growth for the firm.

Question

Quizplus · Accepted Answer

The PEG (Price/Earnings to Growth) ratio compares a company's price/earnings (P/E) ratio with its earnings growth rate, providing a more nuanced view of a stock's value by taking into account its future earnings growth. This helps investors to determine if a stock is overvalued, undervalued, or fairly valued, considering its earnings growth prospects.

The PEG Ratio