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P/E Ratios and Mark-to-Book Ratios

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I know most of these answers but I want your expertise to confirm what I know is right; can anyone please help with the following questions?

1- How can a company with a high ROE have a low PE ratio?

2- What type of companies have:

a. a high PE ratio and a low market-to-book ratio?

b. a high PE ratio and a high market-to-book ratio?

c. a low PE ratio and a high market-to-book ratio?

d. a low PE ratio and a low market-to-book ratio?

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300 words, APA

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The response addresses the queries posted in 413 words with references.

//For understanding the PE ratios and market-to-book ratios, we have to understand the concept of return on equity. It will assist in understanding the earnings of a company. Then, we will discuss about the management of a company with high ROE and low PE ratio. //

Answer 1

Return on equity is measured by dividing the net profit after tax, interest and preference divided by the equity shareholders fund or net worth. Return on equity shows the utilization of the equity shareholders funds. To analyze the return on equity as an alternative, earning per share is ...

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Ashish Sharma, MBA (IP)
Education
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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