How price/ earning ratio is calculated?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Market price of share/ earning per share.
P/E Ratio = Market Price of a share/earnings per share
The price-to-earnings ratio (P/E ratio) is a financial metric. It reflects investors expectation about the growth in the firm’s earnings and reasonableness of the market price of its shares. P/E Ratio vary from industry to industry and company to company in the same industry depending upon investors perception of their future.