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Which firms have relatively high or low price-earnings ratio?

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For each of the following four groups of companies, state whether you would expect them to distribute a relatively high or low proportion of current earnings and whether you would expect them to have a relatively high or low price-earnings ratio.

a. High-risk companies
b. Companies that have recently experienced a temporary decline in profits
c. Companies that expect to experience a decline in profits
d. "Growth" companies with valuable future investment opportunities

Please provide details. Thanks!

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Solution Summary

This solution identifies which types of companies have a high/low proportion of current earnings and relatively high/low price-earnings ratio in 137 words.

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a. High-risk companies

The high-risk firms usually have big variance in their return rates, it might be very high or negative. So we would expect high dividend payout ratio. However, since the price is usually low, it might have a low price-earnings ratio. ...

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