You own a share of stock in Hershey Foods.In reviewing the stock information in the Wall Street Journal,you note that Hershey's PE ratio is 19.The PE ratio indicates:
A)the price Hershey Foods stock is trading at now.
B)the amount investors are willing to pay for every $1 of Hershey Food's earnings.
C)the percentage of Hershey Food's earnings paid out in dividends.
D)the amount you can expect to earn on the stock.

Question

Quizplus · Accepted Answer

The PE (Price-to-Earnings) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. Thus, a PE ratio of 19 means investors are willing to pay $19 for every $1 of Hershey Food's earnings.

You Own a Share of Stock in Hershey Foods