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SIE: Equity Securities
SIE practice questionmediumP/E Ratio

A company's price-to-earnings (P/E) ratio provides investors with an indication of:

  1. AHow much investors are willing to pay for each dollar of earnings✓ Correct answer
  2. BThe dividend paid per share annually
  3. CThe book value of the company per share
  4. DThe company's bond rating
Explanation

Why AHow much investors are willing to pay for each dollar of earnings

The P/E ratio measures market price relative to earnings per share, indicating investor sentiment. It does not relate to dividends, book value, or bond ratings.

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