According to finance professionals,which one of these factors has the biggest impact on a firm's PE ratio?
A)Accounting practices of the firm
B)Risk-level of the firm
C)Size of the firm
D)Growth opportunities
E)Age of the firm

Question

Quizplus · Accepted Answer

Growth opportunities have the biggest impact on a firm's PE ratio. A firm with high growth opportunities would have a higher PE ratio because investors expect higher earnings in the future. On the other hand, a company with limited growth prospects will have a lower PE ratio. Accounting practices, risk-level, size, and age of the firm can impact the valuation of a company, but they do not have as significant of an impact as growth opportunities.

According to Finance Professionals,which One of These Factors Has the Biggest