Ambrose Atwater plc's results for the year ended 31 August 20X2 included the following information: profit after tax was £6 800 000, tax was £3 200 000 and total dividends paid were £2 000 000.The price of one ordinary share in the company on 31 August 20X2 was £2.92.The number of ordinary shares in issue throughout the financial year ended on 31 August 20X2 was 20 million. What was the company's price/earnings ratio at 31 August 20X2 (to one decimal place)?

Question

Quizplus · Accepted Answer

The price/earnings (P/E) ratio is calculated by dividing the market value per share by the earnings per share (EPS). First, calculate the EPS: Profit after tax is £6,800,000, and there are 20 million shares, so EPS = £6,800,000 / 20,000,000 = £0.34. Then, calculate the P/E ratio: £2.92 (price per share) / £0.34 (EPS) = 8.588, which rounds to 8.6.

Ambrose Atwater Plc's Results for the Year Ended 31 August