Read the following information carefully and answer the question.

The Balance Sheet of ABC Ltd as on 31 March 2022:

Additional information :

1. Market price of share = 34

2. Net profit after tax = 1,50,000

3. Tax = 50,000

The Price Earning (P/E) ratio will be :

9.86 times

The correct answer is option 1- 9.86 times.

P/E Ratio = Market price of share/ Earning per share
              = 34/3.45
              = 9.86 times

Net profit after tax = 1,50,000
Dividend on preference shares = 1,00,000 x 12/100
                                             = 12,000

* Profit after preference dividend = 1,50,000 - 12,000
                                                     = 1,38,000
This is profit that is left for equity shareholders.

* No of equity shares = 4,00,000/10
                             = 40,000

Earning per share = Profit left for equity shareholders/No of equity shares
                          = 1,38,000/40,000
                          = ₹3.45