Asked by Janet Miller on Apr 27, 2024
Verified
The price-earnings ratio reveals information about the stock market's expectations for a company's future earnings growth.
Price-earnings Ratio
A valuation metric for assessing a company's current share price relative to its per-share earnings.
Stock Market
A public market for the trading of company stock and derivatives at agreed prices.
Future Earnings
Projected profits or income a company expects to generate in future periods.
- Assess the value of specific financial ratios, such as dividend yield and price-earnings ratio, in analyzing a company's performance.
Verified Answer
KJ
Krishna JayaswalApr 28, 2024
Final Answer :
True
Explanation :
The price-earnings ratio is a valuation metric that is calculated by dividing a company's current stock price by its earnings per share. It reflects the market's expectation of a company's future earnings growth and is often used to compare the relative value of different stocks within the same industry. A higher price-earnings ratio suggests that investors anticipate a stronger future growth potential for the company, while a lower ratio might indicate lower growth expectations.
Learning Objectives
- Assess the value of specific financial ratios, such as dividend yield and price-earnings ratio, in analyzing a company's performance.