Last year,Alfred's Automotive had a price-earnings ratio of 15. This year,the price earnings ratio is 18. Based on this information,it can be stated with certainty that:
A) the price per share increased.
B) the earnings per share decreased.
C) investors are paying a higher price for each share of stock purchased.
D) investors are receiving a higher rate of return this year.
E) either the price per share, the earnings per share, or both changed.

Question

Quizplus · Accepted Answer

The change in the price-earnings ratio indicates that either the price per share, the earnings per share, or both have changed, but it does not specify which one or how.

Last Year,Alfred's Automotive Had a Price-Earnings Ratio of 15