NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)
A stock's market price is ₹450 and its trailing twelve-month earnings per share is ₹30. What is its price-to-earnings (P/E) ratio?
The P/E ratio is 15, obtained by dividing the market price of ₹450 by the earnings per share of ₹30. It shows how many rupees investors pay for each rupee of annual earnings, and multiplying 15 by 30 returns the price.
- A12
- B15Correct
- C20
- D13.5
Explanation
P/E = Market price / EPS = 450 / 30 = 15. Checking backwards: 15 x 30 = 450. The figure 13.5 results from wrongly multiplying by 0.03 style scaling, and 12 or 20 do not reconcile with the data.
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