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 measure of how much investors are willing to pay for each dollar of earnings a company generates. It is calculated by dividing the stock price by the earnings per share (EPS) for a given time period. A high P/E ratio typically indicates that investors expect strong future earnings growth from the company, while a low P/E ratio suggests that the market has lower expectations for future earnings growth. Therefore, the P/E ratio is an important metric used by investors in evaluating a company's stock.

The Amount Shareholders Are Willing to Pay for Each $1