Answer the questions from the passage-
Following information is provided about a Company:
Share Capital:
Equity (Rs.10) Rs. 4,00,000
12% Preference Rs. 1,00,000
General Reserve Rs. 1,84,000
10% Debentures Rs. 4,00,000
Current Liabilities Rs. 1,00,000
Fixed Assets Rs. 9,50,000
Current Assets Rs. 2,34,000
The market price of the share is Rs. 34 and the net profit after tax was Rs. 1,50,000, and the tax had amounted to Rs. 50,000.
P/E Ratio (Price Earning Ratio)
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 9.86 Times
The price earning ratio tells how many rupees the market pays for every rupee the share earns. It compares the market price of one share with its earnings per share.
Market price per share = Rs 34
EPS = Rs 1,38,000 ÷ 40,000 shares = Rs 3.45
P/E ratio = Rs 34 ÷ Rs 3.45 = 9.86 times
A P/E of about 10 means investors are paying nearly ten years’ current earnings for the share, which reflects what they expect from the firm’s future growth.
NCERT (2026-27 edition):
|
