Gleason Company and Henry Company are similar and similar-sized companies operating in the same industry.At the end of the most recent year,Gleason's price/earnings ratio was 22.0,and Henry's price/earnings ratio was 14.2.What conclusion would you draw based on the difference in price/earnings ratios for the two companies?

Question

Quizplus · Accepted Answer

The Answer is The price/earnings ratio is a measure of what investors in the stock market expect for a company.A high P/E ratio means that investors hold the company in high esteem and expect its earnings to increase in the future.The difference between P/E ratios for Gleason and Henry suggests that investors think more highly of Gleason and its future than for Henry.

Gleason Company and Henry Company Are Similar and Similar-Sized Companies