If we divide both sides of the equation by earnings, we get:
A) the price-earnings ratio.
B) the equilibrium interest rate.
C) firm capital gains/losses.
D) the marginal product of capital.
E) inflation-adjusted prices.

Question

If we divide both sides of the equation  by earnings, we get:
A) the price-earnings ratio. 
B) the equilibrium interest rate. 
C) firm capital gains/losses. 
D) the marginal product of capital. 
E) inflation-adjusted prices.

Quizplus · Accepted Answer

Dividing both sides of the equation by earnings gives us the ratio of the stock price to earnings, which is the price-earnings ratio.

If We Divide Both Sides of the Equation by Earnings