NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)
In the context of equity share valuation, the price-to-earnings (P/E) ratio of a company is calculated as:
The P/E ratio is market price per share divided by earnings per share. It shows how much investors pay for each rupee of earnings. The inverse is earnings yield, price to book value is P/B, and dividend over price is dividend yield.
- AMarket price per share divided by earnings per shareCorrect
- BEarnings per share divided by market price per share
- CMarket price per share divided by book value per share
- DDividend per share divided by market price per share
Explanation
P/E equals market price per share divided by earnings per share. The inverse (EPS/price) is the earnings yield. Price divided by book value per share is the P/B ratio, and dividend divided by price is the dividend yield.
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