Asked by
Georgios Pavlidis
on Dec 11, 2024Verified
To the extent that current profits are directly related to future profits, a high price/earnings ratio would indicate that stocks are
A) inexpensive.
B) expensive.
C) going to increase in value in the future.
D) most likely to fall in value if interest rates decline.
Future Profits
Expected financial gains or earnings projected for future periods, considering current business operations and market conditions.
Current Profits
The earnings that a company or individual realizes during a specific period, primarily focusing on the present or most recent fiscal period.
Interest Rates
The cost of borrowing money or the compensation for the service and risk of lending money, typically expressed as a percentage.
- Understand the principles of the price/earnings ratio and its effect on the valuation of stocks.
Verified Answer
AM
Learning Objectives
- Understand the principles of the price/earnings ratio and its effect on the valuation of stocks.