Price-earnings (P/E) ratio is influenced by all of the following BUT
1). the business risk the firm takes on.
2). earnings per share.
3). quality of management.
4). All of the options are true.
Answer : option 4 All of the options are true
The price-to-earnings ratio, often called the PE ratio, is the ratio of market price per share to annual earnings per share for a company’s stock. It measures the payback period for your investment in years. The PE ratio is not particularly relevant as a standalone number, but it is useful for comparing companies in the same industry, and for determining possible entry and exit points for stocks. Current and expected earnings have the most influence on PE ratios
P/E ratio can be influenced by following:
– sales growth of the firm
– risk or volatility in performance
– debt-equity structure of the firm
– dividend payment policy
– quality of management etc