Given market cap of equity and net profit of a company please calculate its PE ratio



This is a question I came across whilst solving a case study exercise for one of the leading bulge bracket investment banks based in Canary Wharf.


The question is tricky as the formula to calculate PE ratio is Price per share on Earnings per share. Given that both the numerator and the denominator of the formula have the same number of shares as the common denominator, PE ratio can also be found by simply dividing the company’s market cap of equity by its total net profit.




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