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

A stock is quoted at ₹250 and its earnings per share for the last twelve months are ₹10. What is its price-to-earnings (P/E) ratio?

The P/E ratio is 25, obtained by dividing the market price of ₹250 by the earnings per share of ₹10. It shows how many rupees investors pay for each rupee of annual earnings.

  1. A25Correct
  2. B2.5
  3. C40
  4. D250

Explanation

P/E = market price divided by EPS = 250 / 10 = 25. The value 40 results from inverting the ratio incorrectly (EPS yield of 4% reciprocal confusion), and 2.5 comes from a decimal slip.

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