Question

The “E” in the PE ratio can be determined in several ways. Identify at least three different variations in measuring earnings for the PE ratio.

Answer 1

P/E ratio holds for Price Earning Ratio,
Wherever value applies to Exchange value Per Share
and
Making attributes to Earning Per Share
Therefore,

Price-Earning Ratio = \frac{Market Price Per Share}{Earnings Per Share

But For Estimates of Gaining per share

We can do some equations

Earning Per Share = \frac{Earnings possible for Equity Share Holders}{Outstanding Number of Shares}

Earning Per Share = \frac{Net Income - Preferred Dividends}{Outstanding Number of Shares At The End Of Year}

Earning Per Share = \frac{Net Income - Preferred Dividends (+ or -) Extraordinary Items }{Weighted AverageNumber of Shares}

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