Which of the following is NOT a correct statement about the price/earnings ratio?
A) A high P/E ratio is often taken to mean the firm has significant prospects for future growth.
B) A P/E ratio of 15 means investors are willing to pay $15 for each $1 of current earnings.
C) Care must be taken in interpreting very high P/E ratios since they can result from a firm having very low earnings.
D) A P/E ratio of 15 means the firm's shares are selling for 15 times current earnings.
E) A firm with high earnings per share will also have a very high P/E ratio.
Correct Answer:
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