homework help

The Price/Earnings (P/E) Ratio:

Personalized homework help for all major subjects.

Order confidently with our risk free, 14-day money-back guarantee.

  • ✔️ No sign-up required
  • | 🔒 100% Confidential

Our Expert Writers

We proudly boast a team of expert professionals with verified academic credentials, selected for their proven skills and flexibility through a strict process.

Engage with experts from the top universities across the globe.

Submit Your Homework

Let our experts help you with your college homework

Please enable JavaScript in your browser to complete this form.

Benefits & Guarantees

plagiarism free policy

Plagiarism free

plagiarism free policy

Strictly confidential

plagiarism free policy

On-time delivery

plagiarism free policy

Affordable pricing

plagiarism free policy

Unlimited revisions

plagiarism free policy

24/7 Support

After understanding the total concept, there is no need for you to run in head deep in the concept. Sort of ratio structures make up for the ultimate value that you get on supplying the net interest. There is a good reason why the price ratio index makes up for an estimate that is counted.

The Price/Earnings (P/E) Ratio: 6

There will be many ratio discussions for the P/E to make it a comparable value measure.


Generally the 1 year annual earnings are used as a proxy. It is supposed to suffice the stock value. The future discounted earning flows are used as a base here. Also one must understand that the price here is the stock earnings, whereas the net income is a flow measure here.

The Price/Earnings (P/E) Ratio 7

The P/E ratio is often that is not always used as the current price. This happens in the practical world only.  The analysts usually estimates nest year’s earnings. This price is divides the current market price.

The entire chapter is about the use of cash flows that are attributed as earnings, and yet cannot be used. As a step of reverting the earnings there can be multiple ways that are you are about to learn.

Many people may wonder that why more than necessary attention is provided to the cash earnings? Especially when the cash flows are already present. Well the truth is that the cash earnings actually help with the future cash flows. And it does this far better than the cash flows in itself.

Usually the cash flows can vary in huge ranges. One particular year it can be hugely negative while in the nest year it may be positive. Now this may not be the problem in NPV, yet, the cash earnings do a better job.

Firstly it is spread over a short period of times. And also, people can expect that it has a good record of inflow an outflow with it of course. This is absolutely why it gives better results.

The Price/Earnings (P/E) Ratio 8

The earning yield usually stands out to be victorious. Of course it provides with positive as well as negative results. But then again these are much more logical and explainable as well.

The Price/Earnings (P/E) Ratio 9


The future is definitely not certain. The earnings which have value today may not have the same effect for future firms. This can be one reason no doubt. You cannot get great value per dollar estimate if you think that today’s value matter. That is you imagine that the future firms will produce this in future as well. You will get the least value through this.

The Price/Earnings (P/E) Ratio 10

As you may have learned on the chapter 3 there is a distinct relation that single earnings hold up to. There is hence a set parameter that these ratios hold up on. As for the cost of capitals, they get lower every time such a ratio is incurred.


Assuming that there is an expectant cash return that your firm encounters, there is to be a cash of $100 change by the coming year. This is mostly undertaken by the income return that is of 5%. As the formula 3.1 determines, the value that is to be gotten of this firm is,

The Price/Earnings (P/E) Ratio 11

A price value of $1000 along with an expectant earning of $100 the P/E ratio stands to be,

The Price/Earnings (P/E) Ratio 12

Computing another value for this example,

The Price/Earnings (P/E) Ratio 13

The market value of P/E earnings will be 5% if?

The Price/Earnings (P/E) Ratio 14

The conclusion is quite simple. The market may expect that by when a firm will progress in its earning. The high P/E ratios are reflections of this only.



The cash flows of a firm can at times be decomposed. Usually it is then spilt into two parts. The first is the hypothetical firm that has zero earnings but has an immense growth opportunity. This is known as the PVGO.

While the other is the firm that has an earning equal to ours, yet it has stopped growing. This theory gives a perspective to the growth in P/E ratios of course.

Taking the example of the firm that works its way up to a market, we can input the values that are all in the stable formula that is making a direct point. There will be many component that works along with the substitute.

The Price/Earnings (P/E) Ratio 15
The Price/Earnings (P/E) Ratio 16
The Price/Earnings (P/E) Ratio 17


Looking at the data that is given, you can take a look at the way that the relationship is explored. As the P/E ratio makes a varied form in the stock market, there is a need for the casual relationship that buds over between an investor and a market analyst.

P/E Ratios and Earnings Growth Rates for Selected Firmsin November 2004

The table that is given here that is 14.1, gives a PVGO calculation summary that stands for absolute real firm bodies. As for the market beta rate, there is always the market assumption that can be made. As far as the inputs are concerned, there is a fine accurate currency that is needed. When you get to compute the factors in the formulas, you can look at the major difference that it creates.

The Price/Earnings (P/E) Ratio 18

P/E Ratios and Earnings Growth Rates for All Firmsin December 2000

This is a certain theory that works only on a piece of paper. There is ought to be a handful of the numbers that can be included in the table numbered 14.1.

The Price/Earnings (P/E) Ratio 19

The External Earnings Growth: If there are better ways absent then we can of course use the 1 year’s proxy. We can make our own assumption. We can subtract the current earnings from the future earnings very well. As for the eternal growth rates that are deduced for the earnings, there is a chance to get the well pained approximate value.

The Price/Earnings (P/E) Ratio 20

The cost of capital: we can always estimate the value that is served on a rate of return by the CAPM formula. This is done to avoid all sort of testing theory that is possible.

The Price/Earnings (P/E) Ratio 21

There will be definite fractioning point where there is a great change in the earnings rate. Thus, this relation is doomed.

The Price/Earnings (P/E) Ratio 22

As the total fact alters into the entire diversity of the perilous manner, there is a high chance of getting the ultimate P/E ratio. There is a rolling comparable that you can get a hold of and learn of.

The Price/Earnings (P/E) Ratio 23

The most unfortunate deal is that there cannot be a specified limit to the 2000 December figuring that is needed to acknowledge of.

The Price/Earnings (P/E) Ratio 24
The Price/Earnings (P/E) Ratio 25
The Price/Earnings (P/E) Ratio 26

Interpreting (Historical) P/E Ratios for the S&P 500

Applying the P/E ratio insights, to the stock market, there can be a simple explanation to the use of S&P 5000. The figure 14.3 shows the graphical representation of this.

The Price/Earnings (P/E) Ratio 27
The Price/Earnings (P/E) Ratio 28

There is always a possibility to get a hand on the substitute that is to be of the authorial value. The most highly acclaimed 2000 view is that of the revised version that you are landed with.

Putting the value into testing, we get a healthy ratio,

The Price/Earnings (P/E) Ratio 29

As depicted on the section 9.4 A, you can get a good substantial equity premium. This is in fact the new economy that is being talked about. There will be a treasury bond that will allow everyone to get an estimate of the yield factor in particular.

The Price/Earnings (P/E) Ratio 30


Links of Previous Main Topic:-

Links of Next Financial Accounting Topics:-

Your Price: $11.00 $10.00

Pricing may change based on requirements

Descriptive text for the image

Get Homework Help In

Maths and Statistics


Humanities & Arts


Essay Writing

How Our Homework Service Works

FAQ number 1

Share your requirements

FAQ number 2

Make secure payment

FAQ number 3

Get homework answers

FAQ - Frequently Asked Questions

Discover quick answers in our FAQ, covering the most common customer questions about our homework help service.

Is your homework service confidential?


Absolutely! Confidentiality is one of the basic guarantees of our service at MyHomeworkHelp.com.

When our customers make their homework orders, they know their information remains 100% confidential.

Even your homework writer will not be provided with your personal details. So, when you hire a professional homework helper on our website, rest assured that your information will remain private and safe.

For a comprehensive understanding of how we protect your privacy, please refer to our Privacy Policy.

Who will help me with my homework?


We work with subject experts from all over the world. We hire them with the help of complex tests in the disciplines of their expertise. We also verify the IDs and academic transcripts of our homework writers to be sure that our experts have a bachelor's or master’s or a PhD degree. This is how we can be sure of the proficiency of our panel of experts who will help you with your homework.

Is it legal to ask for help with homework?


Seeking homework help is perfectly fine and shows your proactive approach to overcoming challenges. But it's important to use our homework service to enhance your understanding, not to replace your own efforts.

Our homework service offers original solutions for personal use, including:

  • Generating ideas or arguments for your research.
  • Deepening your subject comprehension.
  • Direct citation, with proper referencing.

However, it's crucial to avoid plagiarism by not submitting our work as your own. Make sure to check your institution's academic integrity policies before using our services. Our goal is to support your educational journey in a responsible and beneficial way. Refer our honor code for more details.

Is myhomeworkhelp.com legit?


Yes, myhomeworkhelp.com is completely legitimate. We've been successfully connecting students with top experts worldwide since 2012, offering direct, secure communication for a seamless learning experience. With over thousands of students helped and a commitment to innovative, effective education tools, we're dedicated to making learning easier and more accessible for everyone.

You can read our reviews here on Trustpilot and Sitejabber (Independent, verified reviews from buying customers) like you!

Is there a possibility of plagiarism in my completed order?


Unlike our competitors who use cheap and ineffective in -house plagiarism software, MyHomeworkHelp.com uses credible software to check your homework solution originality. We guarantee that your paper will pass TurnItIn checks with a low percentage of similarity. In addition, we also check submitted papers for ai-content using Originality.ai.

You will receive a complemantary plagiarism free report with your completed order.

What makes you one of the best homework help website?


We are not number 1 (yet!). We're an independent, bootstrapped business standing up to Big EdTech for last 12 years. So it means a lot that folks like you are willing to consider our services for your educational needs.

Myhomework Help is recognized as one of the premier websites for homework answers for three key reasons.

  1. Firstly, we pride ourselves on the expertise and qualifications of our tutors/experts, who are selected through a rigorous vetting process to ensure they can provide best academic assistance across a wide range of subjects.
  2. Secondly, our response time to student inquiries is fast (as early as few minutes), reflecting our understanding of the importance of timely support in an academic setting.
  3. Lastly, we keep our pricing very student friendly. Our aim is to provide the best learning experience to students like yourself without burning a hole in your pockets.