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SIE: Equity Securities
SIE practice questioneasyP/E Ratio

The price-to-earnings (P/E) ratio is calculated by:

  1. AMultiplying book value by market cap.
  2. BDividing dividends per share by share price.
  3. CDividing the market price per share by earnings per share.✓ Correct answer
  4. DAdding earnings per share to share price.
Explanation

Why CDividing the market price per share by earnings per share.

P/E is price divided by earnings per share. The other calculations do not define the P/E ratio.

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