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P/E ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › P/E ratio

  • This topic has 4 replies, 3 voices, and was last updated 9 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • November 16, 2015 at 9:46 pm #283160
    farhana001
    Member
    • Topics: 34
    • Replies: 45
    • ☆☆

    Sir, can you explain me December 2014 question 2 part b the discussion part.

    November 16, 2015 at 9:47 pm #283161
    farhana001
    Member
    • Topics: 34
    • Replies: 45
    • ☆☆

    Also explain the significance of high P/E ratio.

    November 17, 2015 at 7:29 am #283212
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54664
    • ☆☆☆☆☆

    I am sorry but you really should watch the free lectures. I spend a lot of time discussing the PE ratio, and I cannot type it all out here.

    A higher PE ratio signifies that shareholders are expecting higher future growth.

    November 26, 2015 at 3:08 am #285321
    sayma
    Participant
    • Topics: 17
    • Replies: 4
    • ☆

    Good day sir
    would like to clarify sth
    Sir you gave an example in your lecture regarding amazon. You said that the investors weren’t expecting that it’lit’ll take 3000yrs to get their money back.
    my doubt is I guess quiet silly but do you mean that even though the p/e ratio quoted in d newspaper was 3000,they still went ahead and invested ecpecting the earning to rise?
    and if the earnings did rise as much as the investors had ecpected,will the p/e ratio then fall?

    November 26, 2015 at 9:04 am #285380
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54664
    • ☆☆☆☆☆

    The market price is always based on their expectations for the future.

    If they start expecting things will be better than they were expecting before, then the price (and therefore the PE) will increase; if they start expecting things will be worse than they expected before, then the price (and therefore the PE) will fall.

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