Question

What does the "price-earnings ratio" ("P/E ratio"; also called the "multiple") measure? How is it expressed as a formula?

Answer 1

The price-earnings ratio (P/E ratio), also known as the multiple, measures the valuation of a company. It is calculated by dividing the stock price by the earnings per share.

Step-by-step explanation:

The price-earnings ratio (P/E ratio), also known as the multiple, is a financial metric used to assess the valuation of a company. It measures the relationship between the price of a company's stock and its earnings per share (EPS). The formula for calculating the P/E ratio is: P/E ratio = Stock Price / Earnings per Share.For example, if a company's stock price is $50 and its EPS is $5, the P/E ratio would be 10 ($50 / $5 = 10).