Traditionally, shares of financially sound companies with stable earnings usually have a price/earnings ratio of:

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Financially sound companies with stable earnings usually have a price/earnings ratio of around 12. This means that the stock price is approximately 12 times the company's earnings per share. A P/E ratio of 90 (Choice A) is considered extremely high, and may indicate that the stock is overvalued. A P/E ratio of 1/4 (Choice C) or 3 (Choice D) is very low, and may indicate that the company's earnings are unstable or unreliable.

Traditionally, Shares of Financially Sound Companies with Stable Earnings Usually