Choice "D" is correct. The P/E ratio measures the amount that investors are willing to pay for each dollar of earnings per share. Higher P/E ratios generally indicate that investors are anticipating more growth and are bidding up the price of the shares in advance of performance.
Choice "a" is incorrect. High P/E ratios generally indicate investor confidence in earnings growth, not performance that has peaked.
Choice "c" is incorrect. High P/E ratios generally indicate investor confidence in earnings growth, not that performance will fall.
Choice "b" is incorrect. High P/E ratios give some insight into investor confidence of earnings growth.
