Which of the following is true about the price-earnings (P/E) ratio of a firm? If the firm's P/E ratio is too low relative to that of similar firms, it means that the market has overvalued its current earnings. The higher the P/E ratio, the less investors are willing to pay for each dollar earned by the firm. The appropriate value of P/E ratio is multiplied by the earnings per share (EPS) to estimate the appropriate stock price. If a company's P/E ratio is too high relative to that of similar firms, its earnings have not been fully captured in the existing stock value. If a firm's P/E ratio is 8 , then, it would take 8 years for an investor to double his or her initial investment. Which of the following is true about the price-earnings (P/E) ratio of a firm? If the firm's P/E ratio is too low relative to that of similar firms, it means that the market has overvalued its current earnings. The higher the P/E ratio, the less investors are willing to pay for each dollar earned by the firm. The appropriate value of P/E ratio is multiplied by the earnings per share (EPS) to estimate the appropriate stock price. If a company's P/E ratio is too high relative to that of similar firms, its earnings have not been fully captured in the existing stock value. If a firm's P/E ratio is 8 , then, it would take 8 years for an investor to double his or her initial investment