EQL217 1

P/E ratio is used by investors to determine a stock's potential for growth.

• True

• False

To calculate the P/E ratio, divide a company's current stock price by ________.

• earnings-per-share

• no. of shares

The share price of a company is 20 and EPS is 10.

What is the P/E ratio?

• 2

• 200

If a company has zero or negative earnings, the P/E ratio will no longer make sense.

• True

• False

The P/B ratio measures the market's valuation of a company relative to its book value.

• True

• False

P/B ratios under ____ are typically considered solid investments.

• 1

• 2

P/B ratio is used by value investors to identify potential investments.

• True

• False

The debt-to-equity ratio measures how much a company is funding its operations using borrowed money.

• True

• False

It indicates whether shareholder equity can cover all debts, 

if needed.

• True

• False

Return on equity (ROE) measures profitability and how effectively a company uses shareholder money.

• True

• False