Which of the following is the formula for computing the price-earnings ratio?
A)Annual dividend per share of common stock/ market price per share
B)Market price per share of common stock/ earnings per share
C)(Net income- preferred dividends)/ number of shares of outstanding common stock
D)Total stockholder's equity/ number of shares of outstanding common stock

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the market price per share of common stock by earnings per share. Therefore, choice B is the correct answer. Choice A is the formula for calculating the dividend yield. Choice C is the formula for calculating earnings per share. Choice D is the formula for calculating book value per share.

Which of the Following Is the Formula for Computing the Price-Earnings