Day: October 16, 2022

The following data is available for a company:

• £1 ordinary shares – 100M
• £1 preference shares – 50M
• net profit (before dividends) – £55M
• ordinary dividend – £15M
• preference dividend – £5M

The market price of one ordinary share is £10.

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

Select ONE answer:

1. 18.2
2. 20
3. 25
4. 28.6

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct = = > EPS is £55M – £5M = £50M / 100M = 50p per share = = > £10 / £0.5 = 20 PE
3. Not correct
4. Not correct

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