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NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets

A company's shares trade at Rs 240. Its trailing twelve-month earnings per share is Rs 12, and the book value per share is Rs 80. What are the P/E and P/B ratios respectively?

The P/E ratio is 20 and the P/B ratio is 3. P/E equals market price Rs 240 divided by EPS Rs 12, and P/B equals Rs 240 divided by book value per share Rs 80. The other options swap or invert the ratios.

  1. A20 and 3Correct
  2. B3 and 20
  3. C20 and 0.33
  4. D12 and 80

Explanation

P/E = price/EPS = 240/12 = 20. P/B = price/book value per share = 240/80 = 3. Option 2 swaps the ratios, option 3 inverts P/B (80/240), and option 4 just lists the raw inputs.

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