rkhicha wrote:Last year the price per share of Stock X increased by k percent and the earnings per share of Stock X increased by m percent, where k is greater than m. By what percent did the ratio of price per share to earnings per share increase, in terms of k and m?
A. k/m %
B. (k - m) %
C. [100(k - m)] / (100 + k) %
D. [100(k - m)] / (100 + m) %
E. [100(k - m)] / (100 + k + m) %
OA later
Let price per share increase by 100%. whicmeans price per share is doubled. k=100
Let earnings per share did not increase at all. m=0
Earlier ratio was p/e
now, 2p/e
perc increase in ratio is 100%
On substitution, only B and D remain.
B is obvous answer and most probably wrong. Under time pressure, we can choose D from here and move on.
Else put , K=100, m=50
B says ratio increases by 50%
which means new ratio should be 3P/2e
But actually new ratio is 2p/3e/2 = 4p/3e
Hence pick D
Hope this helps!!
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