Which of the following is true?
A) The P/E ratio provides information on the price of a stock relative to its current earnings.
B) The P/E ratio provides information on the price of a stock relative to its future earnings.
C) The P/E ratio provides information on the price of a stock relative to its past earnings.
D) The P/E ratio average from 1950-2008 was 26.

Question

Quizplus · Accepted Answer

The P/E ratio (price-to-earnings ratio) compares a stock's current market price to its earnings per share (EPS) over the past 12 months, providing information on the price of a stock relative to its current earnings. B and C are incorrect because the P/E ratio does not take into account future or past earnings, only current earnings. D is irrelevant to the question being asked.

Which of the Following Is True