Use the information below to answer question Maimalari Ltd had (i) Earning per share 47k (ii) Dividend per share 30k (iii) Par value of each share ₦1.20 (iv...
Question 1 Report
Use the information below to answer question Maimalari Ltd had (i) Earning per share 47k (ii) Dividend per share 30k (iii) Par value of each share ₦1.20 (iv) Market price per share ₦1.50What will be the price earnings ratio of the company?
Answer Details
To calculate the price-earnings ratio (P/E ratio) of the company, we need to divide the market price per share by the earnings per share.
The market price per share is given as ₦1.50, and the earnings per share is given as 47k (which is ₦0.47 since the par value of each share is ₦1.20).
So, the P/E ratio can be calculated as:
P/E ratio = Market price per share / Earnings per share
= ₦1.50 / ₦0.47
= 3.19 (rounded to two decimal places)
Therefore, the correct answer is 3.19.
The P/E ratio is an important financial metric that measures the market value of a company's shares relative to its earnings. A higher P/E ratio indicates that the market has higher expectations for the company's future earnings growth, while a lower P/E ratio suggests lower growth prospects. In this case, the P/E ratio of 3.19 suggests that the market values each ₦1 of earnings at ₦3.19, which is a moderate valuation.
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