Question

When comparing investment alternatives to each other, which is the most useful ratio or figure?

	Earnings Per Share (EPS)
	Price-Earnings ratio (PE)
	Market Value Per Share
	Book Value Per Share
	Profit Margin

Answer 1

Answer

​​​​​​Price-Earnings ratio (PE)

Reason

Price-Earnings ratio is one that compares the current price of a share and it's per share earnings. This ratio is also known as the Earnings Multiple.

Precisely speaking , PE ratio is the ratio which shows how much stock investors are paying for each rupee of earnings. It helps us to know whether the market is keeping the company overvalued or undervalued. Potential investors and analysts use this ratio to compare the results of the company with historical results of the same company, and also for comparing two companies for the purpose of investment. Thus, PE ratio is the most useful ratio in comparing investment alternatives.

Other ratios like earnings per share, market value per share, book value per share, profit margin is useful in analysing the results of a single company , and they aren't an accurate measure of comparison of investment alternatives.

Therefore, the answer is Price-Earnings ratio (PE).