The price/earnings ratio shows the ________.

Question

Quizplus · Accepted Answer

The price/earnings ratio (P/E ratio) is calculated by dividing the market price of a share of stock by the company's earnings per share (EPS). Therefore, it shows the market price of $1 of earnings, making option B the correct answer. Option A refers to the dividend yield, which is the annual dividend paid per share divided by the stock price. Option C refers to the debt-to-total assets ratio, which is a measure of a company's leverage. Option D refers to the price-to-dividend ratio, which is the market price of a stock divided by its dividend per share.

The Price/earnings Ratio Shows the ________