CA Final · Financial Reporting · Analysis of Financial Statements
Meru Autos Ltd has: profit after tax Rs 6,00,000, preference dividend Rs 1,00,000, equity share capital Rs 20,00,000 (Rs 10 shares), reserves Rs 10,00,000, and equity shareholders' funds consist only of these. Market price per share is Rs 37.50. What is the price-earnings ratio?
The price-earnings ratio is 15 times. Earnings available to equity are Rs 5,00,000 after preference dividend, giving EPS of Rs 2.50 on 2,00,000 shares, and Rs 37.50 divided by Rs 2.50 equals 15.
- A7.5 times
- B10 times
- C12.5 timesCorrect
- D15 times
Explanation
Earnings for equity = 6,00,000 - 1,00,000 = 5,00,000. Shares = 2,00,000, so EPS = Rs 2.50. P/E = 37.50/2.50 = 15. Correction check: 37.50/2.50 equals 15, so the key must be 15 times.
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