What is Price/Earning Ratio?

I've seen this in MANY reports.. p/e ratio for short.. had no idea what is it, I usually just ignore it.
Laziness is my bad habit, time to take a step forward and forcing myself to believe that "ignorant is NOT bliss".

So let's have a scenario (I love scenarios...and analogies... and story-telling. People who know me well enough will know that).

There are two companies selling televisions- Firm A and Firm B. Firm A has it's stocks priced at $50 per share and Firm B has it's stocks priced at $100 per share. Does this means that Firm B would be a better buy?

Well after doing some research, I learnt that price/earning ratio will help answer that question!

So what is p/e ratio?
P/e ratio determines the stock price per share relative to the annual earnings per share. Faster-growing and more-profitable companies generally has higher p/e ratios. P/e ratio helps to compare the price of a stock to the company's profits per share or the overall market's price level to overall corporate profits.

Below is the formula to calculate p/e ratio (most sites usually calculates this already.)


SP/AE = p/e ratio

SP = Stock price per share
AE= Annual earnings per share (this can be derived from taking the total annual earnings divided by the total number of stocks issued)

A Simple Formula for Foreign Shares

Thinking of pumping SGD14,000 on a USD20 stock? How many can I buy?

I came up with this simple formula, just sub in the details.


[(PA/PFC)-brokerage charge]/PS = number of foreign stocks you can buy.

PA= Principal Amount in SGD
PFC= Price of Foreign currency against SGD
Brokerage Charge= must be already in foreign currency
PS= Price of stock in foreign currency


Therefore If you have $14k, and the price of the USD against SGD is 1.4, and your brokerage charge is USD40, and your stock cost USD20 each, this is how it should work out.

[(14,000/1.4)- 40] / 20 = 498.

Thus with $14,000 SGD, you will be able to buy 498 stocks worth $20 USD each with a brokerage charge of $40.

Hope this helps!