The Price Earnings ratio represents the number of years earnings that it is necessary to have to recover the price paid for the share.

Question

Quizplus · Accepted Answer

The Price Earnings ratio (P/E ratio) is calculated by dividing the current market price of a share by its earnings per share (EPS). It represents the number of years of earnings that it would take to recoup the price paid for the share. Therefore, the statement is true.

The Price Earnings Ratio Represents the Number of Years Earnings