Series 79 practice questioneasyP/E Ratio
A company has a share price of $40 and earnings per share (EPS) of $2. What is its price/earnings (P/E) ratio?
- A20x✓ Correct answer
- B10x
- C15x
- D5x
Explanation
Why A — 20x
P/E ratio = Share Price / EPS = $40 / $2 = 20x, so A is correct. B is if you divide $2 by $40; C and D are not correct given the data.
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