John keeps track of stock information for the Wilhelm Corporation on a financial website. He has discovered that the company's pricetoearnings ratio has risen significantly in recent days. John can conclude that the investors will expect Wilhelm's earnings to grow in the future.

Question

John keeps track of stock information for the Wilhelm Corporation on a financial website. He has discovered that the company's price­to­earnings ratio has risen significantly in recent days. John can conclude that the investors will expect Wilhelm's earnings to grow in the future.

Quizplus · Accepted Answer

A high price-to-earnings ratio generally indicates that investors have high expectations for a company's future earnings growth. Therefore, if John has observed that Wilhelm Corporation's price-to-earnings ratio has risen significantly, he can reasonably conclude that investors will be expecting the company's earnings to grow in the future.

John Keeps Track of Stock Information for the Wilhelm Corporation