Write a short note on valuation of shares based on Price Earning Ratio.

Valuation of Shares based on Price Earning Ratio This method is suitable for ascertaining the market value of shares which are quoted on as recognised stock exchange. According to this method, the shares are valued on the basis of earning per share multiplied by price earnings ratio. Thus, Market value of shares = Price earnings ratio x Earning per share Earning per share = Profit available for equity shareholders / Number of equity shares Price earning ratio = Market value of share / Earnings per share