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Q. Calculate the Price earnings ratio?

Price earnings (PE) ratio

PE   = (Market share price/EPS)                     (no. of times)

The PE ratio is most widely quoted investors' ratio.  It tells the market confidence in a company by taking the current market share price in relation to the most recent EPS.  A high PE ratio indicates good growth prospects. PE ratios of many industries are available as published information.  If the PE and EPS are known, the share price of a company can be established as follows:  

Share Price = EPS x PE ratio  

This is useful when valuing shares for unlisted companies, by taking an industry similar PE ratio.

Strategic Management, Management Studies

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