PriceEarnings ratio tends to be high for a firm with a lot o

Price/Earnings ratio tends to be high for a firm with a lot of growth potential. O True False

Solution

The answer is True

PE ratio indicate that expected price of a share based on its earnings. A company with a higher PE ratio indicates positive future performance and investors are willing to pay more for company\'s share

Formula = Maeket price per share/earnings per share