Find the MBA finance interview questions and answers for freshers that are asked in many interviews.
What Is P/E Ratio & How It Is Useful
It act as an indicator of investment health of security market that are listed in the public stock exchanges. It is very high complex concept. The p/e ratio is arrived by using the below formula
Stock or share price / earnings per share (profit after tax & interest / number of ordinary shares issued )
Step by step, How to calculate:
What Is P/E Ratio & How It Is Useful
It act as an indicator of investment health of security market that are listed in the public stock exchanges. It is very high complex concept. The p/e ratio is arrived by using the below formula
Stock or share price / earnings per share (profit after tax & interest / number of ordinary shares issued )
Step by step, How to calculate:
- Identify the total profit after tax & interest of past year
- Divide the number of shares issued
- This gives you earning of each share
- Divide stock price or share by earnings per share
- This gives P/E ratio value
Benefits
- Earnings per share is a yearly total
- It express of how many years required to cover stock price of investment
- It is best viewed to view the share trend. An increase in P/E ratio can see increase in investors at high risks
- It takes longer time earnings to cover the invested amount
- It is helpful to look the earnings over several years
- It is compared to overtime with another company in the same sector
What Is Return On Investment (ROI)?
It is a fundamental measure in finance. It is differ from one to other persons. Many business people measure return on investment (ROI) to know the understandings exactly where they are
Return means generally profit after tax
Return on investment (ROI) is the ultimate measure of any business. In simple how much they invested & in return how much you earned
Return on investment (ROI) is the ultimate measure of any business. In simple how much they invested & in return how much you earned
Example: A CEO invested 100000 Rs and profit earned is 50000. The return on investment (ROI) will be 50000 because he invested & he got profit of 50000
Usually a small investor may think in several ways to get higher return with smaller investment. It is very important to keep in mind that higher returns will have higher risk of their investment
Usually a small investor may think in several ways to get higher return with smaller investment. It is very important to keep in mind that higher returns will have higher risk of their investment
Example:
- If you deposited 100000 in fixed deposit @ 7.5% you will get 7500 additional amount as ROI
- If you bought the equity shares of 100000 Rs & you got a profit of 150000
The return is higher in 2nd scenario but there is a higher risk in that sometimes share value may come down & you may lose the invested money also.
So go the above MBA finance interview questions and answers for freshers that are asked in many finance interviews.
