Question

A company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index most likely has _________.

Answer 1

Answer:

B. a dividend yield which is less than that of the average firm

Explanation:

The P/E ratio can be regarded as ratio that give analysis of value that market is willing to pay at the moment with regards to the earnings in past or future. When the P/E ratio is high then

stock's price is considered high compare to the earnings, a low P/E ratio can be interpreted as having low stock price with respect to the earnings. Stocks that has its P/E ratios below 15 are usually regarded as been cheap , those with ratio above 18 are considered expensive. It should be noted that, A company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index most likely has a dividend yield which is less than that of the average firm.