Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration


Horngren'S Financial And Managerial Accounting
Found in: Page 707

Short Answer

What is the price/earnings ratio, and how is it calculated?

P/E Ratio also known as the price multiple, or the earnings multipleis computed by dividing the stock’s market price by the earnings per share.

See the step by step solution

Step by Step Solution

Step 1: Introduction to topic

The P/E ratio differs across industries and therefore, should either be contrasted with its companions having a similar operational activity of comparable size or with its historical P/E to assess whether a stock is undervalued or overvalued.

Step 2: The price/earnings ratio

The price/earnings ratio is the financial ratio of the market price of a share of common stock to the corporate's earnings per share. It is calculated by taking the market price per share of common stock and dividing it by earnings per share.

Most popular questions for Business-studies Textbooks


Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.