If the market price of a bank's stock is $20, it pays no cash dividend, it pays a 5% stock dividend, and its earnings are negative, what is its price-earnings ratio?

Question

Quizplus · Accepted Answer

The price-earnings ratio is not meaningful for a company with negative earnings, as this ratio is calculated by dividing the market price per share by the earnings per share. Negative earnings make the denominator negative, rendering the ratio not meaningful.

If the Market Price of a Bank's Stock Is $20