Question

If a company has issued 2 million shares, the share price is $125 per share, and the company has generated $18 million in earnings, calculate the PE ratio. Give your answer to 2 decimal places.

Answer 1

Explanation:

The earnings per share can be calculated as

Earnings per Share =Total EarningsTotal Shares=$18,000,0002,000,000=$9.

Therefore the PE ratio is

PE Ratio =$125$9≈13.89.

Answer 2

P/E = 125/9= 13.89:1

Explanation:

2mm shares at $ 125/share

18mm earnings so earnings per share EPS = 18/2 =9

The P/E ratio is calculated by dividing the stock's current price by its latest earnings per share.

P/E = 125/9= 13.89:1