From the following information calculate Price Earning ratio:
Equity Shares of 10 each - 70,000
Net profit after tax before dividend - ₹1,75,000
Market price of share ₹13
Dividend declared @ 15%
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 5.2
Price earning ratio = Market price of a share/Earnings per share
= 13/2.5
= 5.2
Earning per share = Profit available for Equity Shareholders / Number of Equity Shares
= 1,75,000/70,000
= 2.5