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The market price per share is $70.00 and earnings per share is $28.43. What is the price-earnings ratio (to one decimal)?
A2.5
B0.4
C4.1
D1.4
Answer & Solution
Correct answer: A. 2.5
1. Price-earnings ratio = market price per share / earnings per share.
2. = $70.00 / $28.43.
3. = 2.5.
4. Trap: 0.4 (option B) inverts the ratio, dividing EPS by price.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.3.4 "Price Earnings Ratio", p.313_
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