The ________ ratio reflects how much investors are willing to pay for a company's stock per dollar of earnings that the company generates.

Question

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The price/earnings (P/E) ratio measures the relative value of a company's stock price compared to its earnings per share. It is calculated by dividing the market price per share by earnings per share. This ratio is commonly used by investors to determine how much they are willing to pay for a share of a company's stock in relation to the company's earnings potential. A high P/E ratio indicates that investors are willing to pay more for a company's shares, which may indicate that the company is expected to grow rapidly in the future. Conversely, a low P/E ratio may indicate that the company's growth prospects are limited or that it is undervalued relative to its earnings potential.

The ________ Ratio Reflects How Much Investors Are Willing to Pay