Ask Question
16 June, 23:39

You are trying to choose between two stocks, Widget and Gadget. Widget has a current stock price of $30 and earnings per share of $2.00. Gadget has a current stock price of $20 and earnings per share of $1.00. Both are in the media industry and the average P/E ratio (price-to-earnings ratio) for this industry is 15. Use the P/E ratio to determine which stock you anticipate will have higher earnings.

+1
Answers (1)
  1. 17 June, 02:00
    0
    Gadget will have higher earning.

    Explanation:

    Price Earning Ratio is the ratio of Market price to the earning per share. PE Ratio measure the effect of earning over the market price of the company.

    Widget

    Stock Price = $30

    Earning per share = $2

    PE ratio = $30 / $2 = 15 times

    Gadget

    Stock Price = $30

    Earning per share = $2

    PE ratio = $20 / $1 = 20 times

    Gadget will have higher earning.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “You are trying to choose between two stocks, Widget and Gadget. Widget has a current stock price of $30 and earnings per share of $2.00. ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers