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What is the price-to-earnings (P/E) ratio?

  1. A Share price divided by earnings per share
  2. B Earnings per share divided by share price
  3. C Market capitalisation divided by revenue
  4. D Net profit divided by total assets
Answer

Share price divided by earnings per share

P/E shows what investors pay per unit of earnings. A high P/E may signal growth expectations or overvaluation, so it must be compared with peers.

All Finance MCQs

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