You are considering investing in one of two companies. Company A has earning per share of $5 and a market price of $40. Company B has earnings per share of $12 and a market price of $120. Based on that information alone, which company should you invest in? Explain your answer, including what ratio you used to inform your investment decision. Do you think that you have reviewed sufficient information to make your decision? What other information or ratios would be helpful in deciding which company to invest in?
Price to earning ratio A= 40/5= 8 B=120/12 =10 I would invest in company A as it has a lower P/E (price earning) ratio... View the full answer