Which financial ratio measures how much the investing public is willing to pay for a chance to share the company's potential earnings?

Question

Quizplus · Accepted Answer

The price-earnings ratio (P/E ratio) measures the amount that investors are willing to pay per dollar of earnings generated. It is calculated by dividing the current stock price by the earnings per share. A high P/E ratio suggests that investors have high expectations for the company's future earnings potential, while a low P/E ratio may indicate that investors have lower expectations or that the company's earnings are currently depressed.

Which Financial Ratio Measures How Much the Investing Public Is