Brilliant and Diamond plc is a listed company with a market capitalization at 31 December 20X6 of £9 996 000.The company has ordinary share capital of 1.2 million ordinary shares and preference share capital of 0.3 million.Profit before tax was £583 000 and profit after tax (after deduction of preference dividend but before ordinary dividend) was £402 000.Ordinary dividends paid in the year were £120 000. What was the company's price/earnings ratio at 31 December 20X6 (to one decimal place)?

Question

Quizplus · Accepted Answer

The price/earnings ratio is calculated as the market capitalization divided by the earnings attributable to ordinary shareholders. Earnings attributable to ordinary shareholders is the profit after tax minus preference dividends. Here, the earnings are £402,000. The market capitalization is £9,996,000. Therefore, the P/E ratio is £9,996,000 / £402,000 = 24.9.

Brilliant and Diamond Plc Is a Listed Company with a Market