{"id":37059,"date":"2024-06-11T11:07:05","date_gmt":"2024-06-11T11:07:05","guid":{"rendered":"https:\/\/www.greatassignmenthelp.com\/questions\/?p=37059"},"modified":"2024-06-11T11:07:05","modified_gmt":"2024-06-11T11:07:05","slug":"the-price-earnings-ratio-is-computed-by-dividing-the-current-market-price-per-share-of-common-stock-by-earnings-per-share","status":"publish","type":"post","link":"https:\/\/www.greatassignmenthelp.com\/questions\/the-price-earnings-ratio-is-computed-by-dividing-the-current-market-price-per-share-of-common-stock-by-earnings-per-share\/","title":{"rendered":"The price-earnings ratio is computed by dividing the current market price per share of common stock by earnings per share."},"content":{"rendered":"<p data-pm-slice=\"1 1 []\">The price-earnings ratio is computed by dividing the current market price per share of common stock by earnings per share.<\/p>\n<p>a) True<\/p>\n<p>b) False<\/p>\n<p><strong>Answer: a) True<\/strong><\/p>\n<p>Earnings per share are the portions of a company\u2019s total profit that are attributed to each outstanding share of common stock based on the number of shares currently available in the market; the price per share of common stock is the current market value assigned to a single share of stock.<\/p>\n<p>The price-earnings ratio is therefore a measure of the current value of a company\u2019s stock in relation to its earning capacity in the present period; this is expressed as:<\/p>\n<p>P\/E ratio = Trading price of the company\u2019s stock\/ Earnings per share<\/p>\n<p>The P\/E ratio gives the investor a feel of the number of dollars investors are wishing to pay for each dollar of earnings the company makes. It is a factor that determines the company\u2019s stock price about the company\u2019s profits. The P\/E ratio tendency which means that a higher P\/E ratio can be interpreted in several ways \u2013 investors are ready to pay for the company\u2019s shares more than the company\u2019s earnings per share, it may reflect their expectations for the company\u2019s future growth or any other factors. However, if the P\/E ratio is low this may be interpreted to mean that the company\u2019s stock is low because it has not been looked at by serious investors or that investors have some doubts about the company and its prospects.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The price-earnings ratio is computed by dividing the current market price per share of common stock by earnings per share. a) True b) False Answer: [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The price-earnings ratio is computed by dividing the current market price per share of common stock by earnings per share.<\/title>\n<meta name=\"description\" content=\"The price-earnings ratio is computed by dividing the current market price per share of common stock by earnings per share.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.greatassignmenthelp.com\/questions\/the-price-earnings-ratio-is-computed-by-dividing-the-current-market-price-per-share-of-common-stock-by-earnings-per-share\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The price-earnings ratio is computed by dividing the current market price per share of common stock by earnings per share.\" \/>\n<meta property=\"og:description\" content=\"The price-earnings ratio is computed by dividing the current market price per share of common stock by earnings per share.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.greatassignmenthelp.com\/questions\/the-price-earnings-ratio-is-computed-by-dividing-the-current-market-price-per-share-of-common-stock-by-earnings-per-share\/\" \/>\n<meta property=\"og:site_name\" content=\"Questions - 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