Question

Sam has been following information about Admiral Engines on a financial website. He has noticed that the firm's P/E has been steadily rising. Sam can conclude from this result that:

Question options:

a) Admiral Engines is in serious financial trouble.
b) the company has recently increased its dividend.
c) the company's future earnings may grow.
d) Admiral Engines has just issued more shares of common stock.

Answer 1

C, the company's future earnings may grow

Step-by-step explanation:

A price-to-earning ratio is the

If the P/E (price to earning ratio) has been increasing steadily over the years, it means that the company is doing financially well and also making profits. Since one of the aims of business is to make profit, the continous rising of price to earning ratio thorugh the years means that the earnings may continue to grow all things being equal.

With this ijfromation, it is safe for Sam to invest in Admiral Engines stock.

Cheers.