What Is a P/E Ratio?
Think of it as a price tag with a time label: how many years of today's profit you are paying for.
Video coming soon. The lesson video will appear here once it is published on YouTube.
Check yourself: sample questions
Think about each question, pick what you would answer if you like, then select “Show answer” to see the solution and why. Nothing is graded or sent to us. Example numbers are worked examples, not predictions.
1.What does P/E stand for, and how is it computed?
Think of it as a price tag with a time label: how many years of today's profit you are paying for.
2.Both cafes ask 600,000. Leo's earns 60,000 and Marge's 20,000. What are their P/E ratios?
Per euro of profit, Marge's cafe costs three times as much, but more expensive is not the same as worse.
3.What is the difference between trailing and forward P/E?
Memory hook: trailing is the rear-view mirror, forward is the windshield.
Full course: 5 more questions for this lesson
The full course unlocks all self-check questions of all 365 lessons, the daily plan, your progress and the printable learning record. Lessons 1 to 7 are completely free.
See the full course Start the free week
Already bought? Open the course on this device
Sources (3)
Education only. Not financial advice.