Finance and Financial Management - P/E Ratio of MNC

Running head: FINANCE AND FINANCIAL MANAGEMENT
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FINANCE AND FINANCIAL MANAGEMENT

FINANCE AND FINANCIAL MANAGEMENT
Question 2
All three companies are multinational corporations (MNCs) in the mining industry. P/E ratio
is the ratio used to estimate the current share price which is relative to the price earnings
ratio. P/E ratio is the ratio which is used by the shareholders for making the apple to apples
comparison. The formula of P/E ratio is determined below.
Market value per share / earnings share.
Three companies that have been analysed are Rio Tinto, BHP group and Anglo American
over the period of the ten years from 2009 to 2018. In case of Rio Tinto there is not much of
the fluctuation that has been observed. There are several factors which affect the P/E ratio
such as a company with high P/ E ratio usually indicates the positive future performance and
in that sense the shareholders agree to pay more and if the situation is reversed it’s a vice
versa category. From the current scenario it can be understood that in the year 2009, P/E ratio
earlier increased from 12 to 14.6 and then eventually it fell down to 6.3 times. Thereafter the
graph of the company increased from 8 to 15.8 times. This signifies that how well the