P/E ratio for Vriend Software Inc. Introduction: Book value per share : It is a metric used by investors to know whether the price of a share is undervalued or overvalued by comparing it to the market value per share. If a companyâ€™s book value per share is lower than the market value per share, its stock is overvalued and, if the book value per share is higher than the market value per share, the stock is undervalued. Earnings per share: EPS is the profit earned by shareholders on each share owned by them. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company. P/E ratio: Price earnings ratio is calculated by dividing a companyâ€™s current share price by its EPS. It helps in valuing the present as well as future profitability of a company.

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Chapter 2, Problem 26P

Summary Introduction

To calculate: P/E ratio for Vriend Software Inc.

Introduction:

Book value per share:

It is a metric used by investors to know whether the price of a share is undervalued or overvalued by comparing it to the market value per share. If a companyâ€™s book value per share is lower than the market value per share, its stock is overvalued and, if the book value per share is higher than the market value per share, the stock is undervalued.

Earnings per share:

EPS is the profit earned by shareholders on each share owned by them. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.

P/E ratio:

Price earnings ratio is calculated by dividing a companyâ€™s current share price by its EPS. It helps in valuing the present as well as future profitability of a company.

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