THE PE RATIO IS CALCULATED BY DIVIDING CURRENT SHARE PRICE BY EARNING PER SHARE.
FORMULA: CURRENT SHARE PRICE
EARNING PER SHARE
THE REASONS FOR LOW PE RATIO COULD BE :
1. LOWER SHARE PRICE OF COMPANY'S SHARE.
2. HIGH EARNING PER SHARE
MARKET TO BOOK RATIO
THE RATIO SHOWS THE MARKET VALUE RELATIVE (MARKET CAPITALIZATION) TO BOOK VALUE WORTH OF COMPANY.
THIS SHOWS THAT HOW MUCH EQUITY INVESTORS ARE PAYING FOR EACH DOLLAR IN NET ASSETS.
THE HIGH MARKET VALUE IS FOR COMPANIES WHOSE MARKET CAPITALIZATION IS HIGHER OR THE BOOK VALUE IS LOW.
Get Answers For Free
Most questions answered within 1 hours.