A firm's P/E ratio tends to be higher if ________.

Name: A firm's P/E ratio tends to be higher if ________.
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Question

Quizplus · Accepted Answer

A firm's P/E ratio tends to be higher if its risk is lower and its growth prospects are higher. This is because a lower risk typically indicates a more stable and reliable earnings stream, which investors are willing to pay a premium for. Additionally, higher growth prospects suggest that the firm is expected to generate higher earnings in the future, which further justifies a higher P/E ratio.

A Firm's P/E Ratio Tends to Be Higher If ________