FINRA SIE: Securities Industry Essentials Exam
How does the price-earnings (P/E) ratio show the value of a company's stock?
Not Correct
Correct!
Select an option above to see an explanation here.
A) The P/E ratio does not indicate the company's debt level. It is a valuation ratio of a company's current share price compared to its per-share earnings. B) The P/E ratio does not show the company's dividend payout ratio. It is a valuation ratio, not a measure of how much dividends a company pays out. C) The P/E ratio does not reflect the company's cash flow. It is a valuation ratio of a company's current share price compared to its per-share earnings. D) P/E ratio indicates market's growth expectations.