If business risk decreases for Megabucks,Inc.,the P/E will __________,other things the same.
A)increase
B)stay the same
C)decrease
D)increase or decrease but not stay the same

Question

Quizplus · Accepted Answer

When business risk decreases, investors perceive the company as safer and more stable, which could lead to an increase in demand for its stock. This increase in demand would cause the stock price to rise and, in turn, increase the P/E ratio. Therefore, the P/E ratio would increase.

If Business Risk Decreases for Megabucks,Inc