High price to earning ratio shows company's_____________?
Correct answer: C. High growth prospect
- A. Low dividends paid
- B. High risk prospect
- C. High growth prospect
- D. High marginal rate
Explanation
A high price-earnings ratio means investors are paying a high price for each unit of current earnings, usually because they expect strong future earnings growth. It does not by itself indicate high dividends or a high marginal tax rate.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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