Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?
A)Return on equity
B)Price-earnings ratio
C)Book value per share
D)Dividend yield

Question

Quizplus · Accepted Answer

The ratio that compares earnings per share (EPS) to the market price for a share of the company's stock is called the price-earnings (P/E) ratio. This ratio is used to determine the relative value of a company's shares compared to its earnings. A high P/E ratio could suggest that the market has high expectations for the company's future earnings growth, while a low P/E ratio could indicate that the company is undervalued or has lower growth projections.

Which Ratio Compares the Earnings Per Share of a Company