NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks
Asha Textiles Ltd. has a net profit after tax of Rs 60 crore, 10 crore equity shares outstanding and a market price of Rs 90 per share. What is its price-earnings (P/E) ratio?
The P/E ratio is 15 times. Earnings per share is Rs 60 crore divided by 10 crore shares, which is Rs 6, and dividing the market price of Rs 90 by this EPS gives 15. The other values come from mixing up the figures.
- A10 times
- B15 timesCorrect
- C6 times
- D9 times
Explanation
EPS = 60 crore / 10 crore shares = Rs 6. P/E = 90 / 6 = 15 times. Check: 15 x 6 = 90. Dividing the price by 10 (the share count in crore) gives 9, which wrongly ignores the profit; 10 is incorrect.
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