If business risk decreases for Megabucks, Inc., its P/E should:
A) increase.
B) stay the same.
C) decrease.
D) increase or decrease depending on the level of interest rates.

Question

Quizplus · Accepted Answer

A decrease in business risk generally makes a company more attractive to investors, leading to a higher price-to-earnings (P/E) ratio as investors are willing to pay more for the company's earnings.

If Business Risk Decreases for Megabucks, Inc