This ratio shows the market`s expectations and is the price you must pay per unit of current earnings.a.Solvency Ratiob.Price-Earnings Ratioc.Liquidity Ratiod.EBITDA Multiple
Question
This ratio shows the market`s expectations and is the price you must pay per unit of current earnings.a.Solvency Ratiob.Price-Earnings Ratioc.Liquidity Ratiod.EBITDA Multiple
Solution
The correct answer is b. Price-Earnings Ratio. This ratio is used to determine the market's expectation by comparing the market value per share with the earnings per share. It indicates how much investors are willing to pay per unit of earnings. A high P/E ratio could mean that the market has high hopes for a company's future growth.
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