P/E ratios are used in combination with expected earnings to provide estimates of share price changes.

Question

Quizplus · Accepted Answer

P/E ratios are often used as a tool to evaluate the relative value of different companies and to provide some indication of how much investors are willing to pay for each dollar of earnings. By multiplying a company's earnings per share (EPS) by its P/E ratio, investors can estimate what the share price might be under different scenarios.

P/E Ratios Are Used in Combination with Expected Earnings to Provide