Which one of these statements is true concerning the price-earnings (PE) ratio?
a. A high PE ratio may indicate that a firm is expected to grow significantly
b. a PE ratio of 16 indicates that investors are willing to pay $1 for every $16 of current earnings
c. PE ratios are unaffected by the accounting methods employed by a firm
d. the PE ratio is classified as a profitability ratio
e. the PE ratio is a constant value for each firm
Answer: a. A high PE ratio may indicate that a firm is expected to grow significantly
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