The P/E ratio,or price to earnings ratio of a stock,can be computed using which of the following formulas?
A)(Revenue per share)÷ (Price of stock share).
B)(Price of stock share)÷ (Revenue per share).
C)(Earnings per share)÷ (Price of stock share).
D)(Price of stock share)÷ (Earnings per share).

Question

Quizplus · Accepted Answer

The P/E ratio is calculated by dividing the price of the stock share by the earnings per share. This gives investors an idea of whether a stock is overpriced or undervalued relative to its earnings. Thus, the correct formula is (Price of stock share)÷ (Earnings per share).

The P/E Ratio,or Price to Earnings Ratio of a Stock,can