A price-earnings ratio is:
A)the price of a firm's stock divided by the firm's dividend over the past year
B)the price of a firm's stock divided by the amount the firm earned per share over the past year
C)the earnings of a firm over the past year divided by the price of the stock at the end of the year
D)the price of a firm's stock divided by the earnings of the firm over the past year

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the current market price of a stock by its earnings per share (EPS) over the past year. This measures how much investors are willing to pay per dollar of earnings, indicating the stock's value.

A Price-Earnings Ratio Is