Question
In: Accounting
Explain how to calculate the price-earnings ratio and describe how it is used in analysis of...
Explain how to calculate the price-earnings ratio and
describe how it is used in analysis of a company's financial
condition and performance.
Solutions
Expert Solution
| CALCULATION OF PE RATIO = Price Per shares / Earning per shares | |
| Let assume the Earning per share is $ 10 Per Shares and market price is $ 50 | |
| Year 20XX | |
| PE Ratio = | |
| Market Price Per shares = | $ 50.00 |
| Divide By | "/" By |
| Earning Per shares = | 10.00 |
| PE Ratio = | $ 5.00 |
As per the above example and formula we know that Price - Earning ratio is a market prospect ratio that calculates the market value of a stock relative to its earnings by comparing the market price per share by the earnings per share. In other words, the price earnings ratio shows what the market is willing to pay for a stock based on its current earnings
ekkarill92 answered 2 years agoRelated Solutions
the price-to-earnings ratio (P/E) is one of the most common stock analysis tools used by investors...
the price-to-earnings ratio (P/E) is one of the most common
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stock is over- or under-valued, what else can P/E tell us?
Describe how ratio analysis can be used to improve operations and reduce debt ? Describe how...
Describe how ratio analysis can be used to improve operations
and reduce debt ?
Describe how identifying trends and patterns in financial
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Discussion : The Price Earnings Ratio or PE ratio is an indicator of how expensive a...
Discussion :
The Price Earnings Ratio or PE ratio is an indicator of how
expensive a stock is.
Some investors will look to invest in stocks with a high PE
ratio.
Some will look to invest in stocks with a low PE Ratio.'
Why do different investors select stocks with such
different PE ratios?
Thoughts suggestions and ideas welcome, but please make sure you
support your arguments with appropriate referencing.
One of the things that can be very useful is...
3. Explain how ratio analysis is used to analyze financial performance.
3. Explain how ratio analysis is used to analyze financial
performance.
Explain how in an imperfect capital market where there is risk, that a low price-earnings ratio...
Explain how in an imperfect capital market where there is risk,
that a low price-earnings ratio strategy may be able to generate
excess market returns. Use relevant asset pricing models.
Explain how in an imperfect capital market where there is risk, that a low price-earnings ratio...
Explain how in an imperfect capital market where there is risk,
that a low price-earnings ratio strategy may be able to generate
excess market returns. Please discuss the asset pricing models we
have covered in answering the question.
Compute amazon Profitability and Price/earnings/ ratio. Please explain what the ratio means, why the ratio is...
Compute amazon Profitability and Price/earnings/ ratio. Please
explain what the ratio means, why the ratio is important, and
relate the result to some context that makes it meaningful
(competition, industry, year over year)
List explain and show how to calculate two specific ratio measures that could be used to...
List explain and show how to calculate two specific ratio
measures that could be used to measure a banks credit risk. In each
case explain whether an analyst would want a higher or low ratio
than the ratios of the banks peer group and why
Profitability Ratios, Im having understanding the price to earnings ratio, Can you explain the Price to...
Profitability Ratios, Im having
understanding the price to earnings ratio,
Can you explain the Price to earnings
Ratio?
What does it mean when the price to earnings ratio is
10?
What does it mean that a company is overvalued or
undervalued and how do you determine that?
Explain the use of return on assets (ROA) and the price-to-earnings (PE) ratio in evaluating the...
Explain the use of return on assets (ROA) and the
price-to-earnings (PE) ratio in evaluating the performance of a
company. How do you calculate ROA and PE ratio and how can market
conditions affect these metrics?
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