NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
A stock has a market price of Rs 600 and a face value of Rs 10. Its trailing twelve-month earnings are Rs 2,400 crore and it has 120 crore shares outstanding. What is its trailing P/E ratio?
The trailing P/E is 30. Earnings per share equal Rs 2,400 crore divided by 120 crore shares, which is Rs 20, and the market price of Rs 600 divided by this EPS gives a price-earnings multiple of 30.
- A30Correct
- B24
- C60
- D20
Explanation
EPS = 2,400 / 120 = Rs 20. P/E = 600 / 20 = 30. Using face value Rs 10 instead of price would give 0.5, and 24 would result from an incorrect EPS of Rs 25.
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