Which of the following statements concerning price earnings ratio (PER)is true?
A) PER is calculated as current market price divided by dividends per share.
B) PER is calculated as total shareholders' equity divided by earnings per share.
C) PERs are commonly between 10 and 15 times for industrial companies.
D) PER is not affected by a change in the share price.

Question

Quizplus · Accepted Answer

The PER is calculated as current market price divided by earnings per share. PERs vary depending on the industry and market conditions but are commonly between 10 and 15 times for industrial companies. The PER is affected by changes in the share price, as it is based on the current market price. Therefore, options A and D are incorrect. Option B is also incorrect, as the calculation of PER does not involve total shareholders' equity.

Which of the Following Statements Concerning Price Earnings Ratio (PER)is