Question

multiple select question

select all that apply

identify what is needed to calculate the p/e ratio.

stock price
return on equity
earnings per share
average stockholders equity
common stock dividends declared

Explanation:

Define the P/E ratio formula

The Price-Earnings (P/E) ratio is a widely used financial metric calculated as:

$$ \text{P/E Ratio} = \frac{\text{Market Price per Share}}{\text{Earnings per Share (EPS)}} $$

Identify the required components

Based on the formula, the two components needed to calculate the P/E ratio are:

1. Stock price (Market Price per Share)
2. Earnings per share (EPS)

Evaluate the given options

• Stock price: Required (numerator).
• Return on equity: Not required.
• Earnings per share: Required (denominator).
• Average stockholders' equity: Not required.
• Common stock dividends declared: Not required.

Answer:

• Stock price (Correct answer)
• Return on equity
• Earnings per share (Correct answer)
• Average stockholders' equity
• Common stock dividends declared