The stock of corporation A sells at a price of $50 a share. Corporation A has...
The stock of corporation A sells at a price of $50 a share. Corporation A has EPS of $5 and a PE ratio of 10. The stock of corporation B sells at a price of $200 a share. It has EPS of $1 and a PE ratio of 200. From that information, we can conclude that
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a |
Corporation B may be perceived to have greater growth potential than Corporation A. |
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| b |
Corporation A is less profitable than corporation B. |
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| c |
Corporation A does not pay a dividend but Corporation B does. |
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| d |
Corporation B has less debt than corporation A. |
Homework Answers
The price-to-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings.
The answer is a. Corporation B may be perceived to have greater growth potential than Corporation A
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