The price-earnings ratio is defined as:
A) The book value per share divided by the earnings per share.
B) The market price per share divided by the earnings per share.
C) Total revenue divided by net income.
D) The market price per share divided by the dividends per share.
E) The book value per share divided by the dividends per share.

Question

Quizplus · Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the market price per share of a company's stock by its earnings per share (EPS). This ratio is used to evaluate whether a stock is over or under-valued by comparing the company's current market price to its earnings.

The Price-Earnings Ratio Is Defined As