Which one of the following statements is true concerning the price-earnings rati

Question

Which one of the following statements is true concerning the price-earnings ratio? a. Price-earnings ratios are sensitive to the accounting methods employed by the firm. b. A firm with low current earnings will also have a low price-earnings ratio. c. A firm with high earnings per share will also have a very high price-earnings ratio. d. A high price-earnings ratio is often taken to mean that a firm has poor prospects for future growth. e. A price-earnings ratio of 12 means that investors are willing to pay $1 for every $12 of current earnings.
Which one of the following statements is true concerning the price-earnings ratio? a. Price-earnings ratios are sensitive to the accounting methods employed by the firm. b. A firm with low current earnings will also have a low price-earnings ratio. c. A firm with high earnings per share will also have a very high price-earnings ratio. d. A high price-earnings ratio is often taken to mean that a firm has poor prospects for future growth. e. A price-earnings ratio of 12 means that investors are willing to pay $1 for every $12 of current earnings.
Which one of the following statements is true concerning the price-earnings ratio? a. Price-earnings ratios are sensitive to the accounting methods employed by the firm. b. A firm with low current earnings will also have a low price-earnings ratio. c. A firm with high earnings per share will also have a very high price-earnings ratio. d. A high price-earnings ratio is often taken to mean that a firm has poor prospects for future growth. e. A price-earnings ratio of 12 means that investors are willing to pay $1 for every $12 of current earnings.

Explanation / Answer

Ans:

a. Price-earnings ratios are sensitive to the accounting methods employed by the firm.

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