Lesson Plan

• Describe the purpose of the price/earnings (P/E) ratio in investment analysis.
• Calculate the P/E ratio using market price per share and earnings per share.
• Interpret P/E values by comparing them with industry averages, historical figures and competitors.
• Evaluate two key limitations of relying solely on the P/E ratio.

• Projector and screen
• Printed worksheet with company price and EPS data
• Calculators (or spreadsheet access)
• Whiteboard and markers
• Sample financial statements (excerpt)
• Exit‑ticket slips

Start with a quick poll: “Which of today’s listed companies do you think are over‑valued?” Review students’ prior knowledge of earnings per share. Explain that by the end of the lesson they will be able to calculate a P/E ratio and interpret what it tells investors about market expectations.

1. Do‑now (5'): Students calculate the P/E ratio for a simple example on the worksheet and submit answers.
2. Mini‑lecture (10'): Define the P/E ratio, present the formula, and outline the four calculation steps.
3. Guided practice (15'): Work through the Alpha, Beta, Gamma case study, discussing interpretation of high vs. low ratios and the role of industry benchmarks.
4. Group activity (15'): In small groups, students use new company data to compute P/E ratios, compare with the industry average, and note possible over‑ or undervaluation.
5. Plenary (5'): Recap key points, answer lingering questions, and clarify the limitations of the ratio.

Summarise that the P/E ratio links share price to earnings and helps gauge market expectations, while remembering its limitations. For the exit ticket, each student writes one advantage and one limitation of the P/E ratio. Homework: locate a real company’s current share price and EPS, calculate its P/E, and write a brief interpretation.