The amount shareholders are willing to pay for each $1 per share of annual earnings a firm generates is indicated by the
A)equity multiplier.
B)return on equity.
C)price-earnings ratio.
D)DuPont identity.
E)return on assets.

Question

Quizplus · Accepted Answer

The price-earnings ratio (P/E ratio) is a valuation ratio that indicates the amount shareholders are willing to pay for each $1 per share of annual earnings a company generates. It is calculated by dividing the market price per share by the earnings per share (EPS). A higher P/E ratio indicates that investors have higher expectations for the company's future earnings growth.

The Amount Shareholders Are Willing to Pay for Each $1