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Understanding the Basics of the PE Ratio

CORPFN-PRM1ZK

Which of the following statements is/are true about the Price/Earnings Ratio? Select all that apply.

A

The P/E ratio measures how much investors are willing to pay per dollar of current earnings.

B

A higher P/E may be taken to mean that the market has a belief that the organization has significant prospects for growth because investors are willing to pay more for each dollar of current earnings.

C

A lower P/E ratio can indicate that the company is undervalued by the market.

D

A higher P/E ratio is always a better potential investment.