Last year,Bennett's had a price-earnings ratio of 10.2.This year,the price earnings ratio is 10.4.Based on this information,it can be stated with absolute certainty that:
A)the price per share increased.
B)the earnings per share decreased.
C)either the price per share,the earnings per share,or both,changed.
D)investors are receiving a higher rate of return this year.
E)investors are paying a higher price for each share of stock purchased.

Question

Quizplus · Accepted Answer

The price-earnings ratio is simply the price per share divided by the earnings per share. If the price-earnings ratio increased, it could be because the price per share went up, the earnings per share went down, or both. Therefore, it can only be stated with absolute certainty that either the price per share or the earnings per share, or both, changed. The other answer choices cannot be determined with certainty based on the information provided.

Last Year,Bennett's Had a Price-Earnings Ratio of 10