How can we calculate Price earnings ratio
How can we calculate Price earnings ratio?
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The P/E Ratio is computed by dividing Market price per equity share to Earnings per share. This permits the company to estimate the appreciation in value of share of company and is employed by investors for decision making on whether or not to purchase shares in a specific company. Subsequent method is employed to compute price earnings ratio: ‘[Price Earnings Ratio = Market price per equity share / Earnings per share]’ For illustration :
The market price of share is Rs. 20 and earnings per share is Rs. 4 Price Earnings Ratio = 20/4 = Rs. 5
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