Question

Calculate the earning per share and price earning ratio from the following data:

	₹
Equity Share Capital (₹ 10 per share)	2,00,000
10% Preference Share Capital (₹ 100 each)	1,50,000
Net Profit after deduction of tax	95,000
Market Price of Equity Share	64

Answer 1

Particulars	₹
Net Profit after Tax	95,000
Less: Preference Dividend (10% of ₹ 1,50,000)	15,000
Profit available to Equity Shareholders	80,000

Equity Share Capital (₹ 10 per share) = ₹ 2,00,000

Number of Equity Shares = `(₹ 2,00,000)/(10)`

= ₹ 20,000 shares

Earning Per Share (E.P.S.) = `"Net Profit after Tax and Preference Dividend"/"Number of Equity Shares"`

= `(₹ 80,000)/(₹ 20,000)`

= ₹ 4 

Price Earning (P.E.) Ratio = `"Market Price of the Equity Share"/"Earning Per Share"`

= `64/4`

= 16 Times