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Basic Question 0 of 9

The P/E ratios of most U.S. companies fall into which of the following categories?

A. 0-10
B. 10-20
C. 20-30
D. 30-40
E. 40-50
Check Answer Next Q Print

User Contributed Comments 14

User Comment
DannyZhou How would I know this? Wild guess? Or is it supposed to be common knowledge?
raymondg Its common knowledge
DS12 It is mentioned in the book.
acemaj Both.
johntan1979 Don't be ignorant. You want to be a CFA, so by right you should know these things!
gill15 It's a pretty valid question. If I'm writing this exam I would want to know where to get this type of information so I could get it right.

And Yeah its in the text]
kritan johntan; and you should know you that one never IS a CFA, but a CFA charterholder...
farhan92 B or C make the most sense (without reading the book)
Teeto One can think in terms of required return on equity. 5%-10% (or P/E 10-20) is the most reasonable one.
houstcarr question was actually referring to US companies in general, which do not trade in that range on average. but if referring to the large caps, then yes. take a look at pink sheets
Inaganti6 Lol John Tan you need to brush up on VII of ethics
Logaritmus Nowadays 20-30 is a P/E ratio for most US Stocks (thanks to negative real interest rates). On the other hand, if interest rates are higher you'll most likely have lower P/E ratio i.e. in Emerging Markets (Turkey, Russia) most companies now have P/E < 10.
sshetty2 AN is trying to say that we should be reading the textbook and not relying solely on their study notes; which is something i have not been doing ffs.
pigletin you should know this fact. but it will never be tested in cfa exam
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I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach

Andrea Schildbach

Learning Outcome Statements

calculate and interpret alternative price multiples and dividend yield;

calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;

explain and justify the use of earnings yield (E/P);

describe fundamental factors that influence alternative price multiples and dividend yield;

calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;

calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;

evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;

calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;

calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;

explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;

calculate and interpret EV multiples and evaluate the use of EV/EBITDA;

CFA® 2025 Level II Curriculum, Volume 4, Module 23.