SIE practice questioneasyP/E Ratio
The price-to-earnings (P/E) ratio is calculated by:
- AMultiplying book value by market cap.
- BDividing dividends per share by share price.
- CDividing the market price per share by earnings per share.✓ Correct answer
- DAdding earnings per share to share price.
Explanation
Why C — Dividing 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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