Suppose Sarah Lee Corporation Stock Has a P/E Ratio of 10

Multiple Choice

Suppose Sarah Lee Corporation stock has a P/E ratio of 10. Which statement best describes this P/E ratio?

A) The P/E ratio is low, indicating that buyers may expect earnings to rise.
B) The P/E ratio is low, indicating that buyers may expect earnings to fall.
C) The P/E ratio is high, indicating that buyers may expect earnings to rise.
D) The P/E ratio is high, indicating that buyers may expect earnings to fall.