Question
What does a high price-earnings ratio indicate about a company? The company's shares are over-priced The greater the confidence level of the company The company is weak The company is risky
Solution
4.2
(276 Votes)
Luke
Master ยท Tutor for 5 years
Answer
The correct answer is:**The greater the confidence level of the company**### Explanation:A high price-earnings (P/E) ratio typically indicates that investors have high expectations for a company's future growth and profitability. It reflects greater confidence in the company's ability to generate earnings in the future. However, it does not necessarily mean the shares are overpriced or that the company is weak or risky. Instead, it suggests that investors are willing to pay a premium for the stock because they believe in its potential.