High or low price-earnings ratio


Problem: For each of the following four groups of companies, state whether you would expect them to distribute a relatively high or low proportion of current earnings and whether you would expect them to have a relatively high or low price-earnings ratio.

a. High-risk companies

b. Companies that have recently experienced a temporarly decline in profits.

c. Companies that expect to experience a decline in profits.

d. "Growth" companies with valuable future investment opportunties.

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Finance Basics: High or low price-earnings ratio
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