The high price to earnings ratio shows companies ____________?
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-to-earnings ratio commonly reflects investors' expectations of strong future earnings growth. It does not automatically 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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