The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings.

Question

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The price-earnings ratio (P/E ratio) is used by investors to evaluate a company's current stock price relative to its earnings per share (EPS). It can be an indication of the market's expectations for a company's future growth in earnings. A high P/E ratio may suggest that the market anticipates strong future earnings growth, while a low P/E ratio may suggest the opposite. Therefore, the statement is true.

The Price-Earnings Ratio Reveals Information About the Stock Market's Expectations