Question

consider the p/e ratios of the following companies:

• company a: 5.34
• company b: 3.33
• company c: 7.90
• company d: 6.75

which company has the lowest relative value among investors?

• company c
• company b
• company d
• company a

Explanation:

Step1: Recall P/E ratio meaning

P/E (Price - Earnings) ratio: A lower P/E ratio generally implies a lower relative value (cheaper) in terms of what investors pay for each unit of earnings.

Step2: Compare the P/E ratios

We have the P/E ratios:

• Company A: \( 5.34 \)
• Company B: \( 3.33 \)
• Company C: \( 7.90 \)
• Company D: \( 6.75 \)

Among these values, \( 3.33 \) (Company B's P/E ratio) is the lowest.

Answer:

B. Company B