Read the following information carefully and answer the question.
The Balance Sheet of ABC Ltd as on 31 March 2022:
| Liabilities | Amount (₹) |
Asset | Amount (₹) |
| Share Capital Equity (₹10) | 4,00,000 | Fixed Assets | 9,50,000 |
| 12% preference shares | 1,00,000 | Current Assets | 2,34,000 |
| General Reserve | 1,84,000 | ||
| 10% Debentures | 4,00,000 | ||
| Current Liabilities | 1,00,000 | ||
| 11,84,000 | 11,84,000 |
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 :
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 9.86 times
P/E Ratio = Market price of a share ÷ Earnings per share
Number of equity shares = ₹4,00,000 ÷ ₹10 = 40,000
Preference dividend = 12% of ₹1,00,000 = ₹12,000
Profit available for equity shareholders = ₹1,50,000 − ₹12,000 = ₹1,38,000
EPS = ₹1,38,000 ÷ 40,000 = ₹3.45
P/E Ratio = 34 ÷ 3.45 = 9.86 times
NCERT (2026-27 edition):
NCERT (2026-27 edition):
|
