Preliminary exam General Studies April 04

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MCQ
GS

1. With reference to “Price-to-Earnings (P/E) ratio” consider the following statements:

  1. It’s a valuation metric used to assess the relative value of a company’s stock price compared to its total earnings
  2. It is one of the most widely used tools by investors and analysts to gauge the attractiveness of a stock
  3. A high P/E ratio suggests that investors are willing to pay a premium for the company’s stock relative to its earnings

How many of the above statements is/are correct?