Explain the ratio PlE: 2o
Price earing ratio = 20 times
Price earning ratio indicates at how many times the stock price of the company is trading in the market to its earing per share.
P/E ratio can be denoted as= Market price per share/ Earning per share or MPS/EPS
Lets say the company has Net income of $1,000,000 and has 10000 oust standing shares. So Earning per share = $1000000/10000=$100 per share.
Further if the P/E ratio is 20 times then Price of the stock in the market will be ($100*20times)= $2000 Market price per share.
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