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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)

A stock is priced at Rs 400 and its annual earnings per share (EPS) are Rs 25. The company's book value per share is Rs 200. What are its P/E ratio and P/B ratio respectively?

The P/E ratio is 16 and the P/B ratio is 2. P/E is the price of Rs 400 divided by EPS of Rs 25, and P/B is the price of Rs 400 divided by book value per share of Rs 200.

  1. A16 and 2Correct
  2. B8 and 2
  3. C16 and 0.5
  4. D2 and 16

Explanation

P/E = price / EPS = 400 / 25 = 16. P/B = price / book value per share = 400 / 200 = 2. Option C inverts the P/B ratio, and option D swaps the two ratios.

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