How would you explain P/E ratio differences among companies? By investor
A)expectations about the future growth of the market.
B)estimates of the recent growth of earnings.
C)expectations about the future growth of earnings.
D)estimates about the recent growth of dividends.

Question

Quizplus · Accepted Answer

P/E ratio differences among companies can be explained by investors' expectations about the future growth of earnings. A company with a higher expected growth rate will generally have a higher P/E ratio than a company with a lower expected growth rate. This is because investors are willing to pay more for a company that will likely experience greater earnings growth in the future. Therefore, option C is the best choice. Option A may have some impact on P/E ratios, but it is more likely to affect broader market trends rather than individual companies. Options B and D are not as relevant to P/E ratios, as they focus on past performance rather than future expectations.

How Would You Explain P/E Ratio Differences Among Companies? by Investor