Hi there,
From the CMA Exam support package, the formula is stated as follows. Wiley also states the same formulas.
r(1) Market-to-book ratio = current stock price / book value per share r
(2) Price earnings ratio = market price per share / EPS s.
Book value per share = (total stockholders' equity – preferred equity) / number of common shares outstanding u
(1) Basic EPS = (net income – preferred dividends) / weighted average common shares outstanding (Number of shares outstanding is weighted by the number of months shares are outstanding) u
(2) Diluted EPS = (net income – preferred dividends) / diluted weighted average common shares outstanding (Diluted EPS adjusts common shares by adding shares that may be issued for convertible securities and options)
If you want to talk further please check your inbox.
Thanks,
Sanobar
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Sanobar Anjum Siddiqui
Academic
Regina SK
Canada
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Original Message:
Sent: 02-18-2021 02:05 AM
From: Archana No Last Name
Subject: Deps or beps for PE ratio
Hey there
While computing PE ratio there's a controversy regarding whether to use deps or beps. Because Hock, Wiley and Gleim uses contrasting equations. Last week for my exam, I've been asked to compute PE ratio and I used deps because I remember how I used beps to find PE ratio and I ended up arriving at the wrong answer. So kindly help me in arriving at a proper solution.
Thank you