NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)
A stock trades at a market price of ₹600 per share and its annual earnings per share (EPS) are ₹30. What is its price-to-earnings (P/E) ratio?
The P/E ratio is 20, because it is calculated by dividing the market price of ₹600 by the earnings per share of ₹30. It shows how many rupees investors pay for each rupee of annual earnings.
- A10
- B20Correct
- C30
- D18
Explanation
P/E = Market price / EPS = 600 / 30 = 20. Checking backwards: 20 x 30 = 600. The value 10 comes from wrongly halving the ratio, while 30 simply repeats the EPS figure and 18 is not derived from the data.
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