Question

A high price-earnings ratio for a stock indicates that either the stock is a. overvalued or people are relatively pessimistic about the corporation's prospects. b. undervalued or people are relatively optimistic about the corporation's prospects. c. undervalued or people are relatively pessimistic about the corporation's prospects. d. overvalued or people are relatively optimistic about the corporation's prospects.

Answer 1

A high price-earnings ratio for a stock indicates that either the stock is overvalued or people are relatively optimistic about the corporation's prospects.

What is the price-earnings ratio?

The price-earnings ratio refers to the ratio of a company's share price to the company's earnings per share. The ratio is used for valuing companies.

The overvalued or people that are relatively optimistic about the corporation's prospects are indicated by a high price-earnings ratio for a stock.

Therefore, D is the correct option.

Learn more about the price-earnings ratio here:

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