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

A company's shares trade at Rs 600. Its net profit is Rs 120 crore and it has 6 crore shares outstanding. What are its EPS and P/E ratio respectively?

EPS is Rs 20 and P/E is 30. Net profit of Rs 120 crore divided by 6 crore shares gives EPS of Rs 20, and the market price of Rs 600 divided by that EPS gives a price-to-earnings multiple of 30.

  1. ARs 20 and 30Correct
  2. BRs 20 and 20
  3. CRs 30 and 20
  4. DRs 10 and 60

Explanation

EPS = 120 crore / 6 crore = Rs 20. P/E = price / EPS = 600 / 20 = 30. Rs 30 as EPS would result from dividing by 4 crore shares, which is not the given data.

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