Question

A company has issued 3.5 million shares with a share price of $57 per share. The company has generated $10.5 million in earnings. Calculate the PE ratio to two decimal places.

Answer 1

Let's begin by listing out the information given to us:

Number of shares (n) = 3.5 million shares

Share price (p) = $57 per share

Company earnings (E) = $10.5 million

We are to calculate PE ratio

$\begin{gathered} PE(Ratio)=\frac{\text{Price per Share}}{\text{Earning per Share}} \\ PE(Ratio)=\frac{n\cdot p}{E}=\frac{3.5\cdot10^6\cdot57}{10.5\cdot10^6}=19 \\ PE(Ratio)=19.00(2\text{ decimal places)} \end{gathered}$