A P/E ratio for a firm that is higher than the industry average may indicate:

Question

Quizplus · Accepted Answer

A higher P/E ratio compared to the industry average signifies that investors are willing to pay more for each dollar of the firm's earnings, indicating that the stock is relatively more expensive. Therefore, D is the correct choice. A is incorrect because a high P/E ratio indicates that investors are willing to pay more for the firm's earnings, which suggests that the firm's growth prospects are seen as being above its competitors. B and C are also incorrect because they assume that a high P/E ratio implies that the stock is either underpriced or overpriced, which is not necessarily true.

A P/E Ratio for a Firm That Is Higher Than