GWW Co BPP 246

The correct answer is that the earnings yield of GWW Co is lower and the P/E ratio of GWW Co is higher compared to its competitor. This may seem counterintuitive, but it is because the earnings yield and P/E ratio are inversely related. The earnings yield is calculated by taking the reciprocal of the P/E ratio. So, if the P/E ratio is higher, the earnings yield will be lower, and vice versa. In this case, GWW Co has a higher P/E ratio of 15 compared to its competitor, which results in a lower earnings yield of 6.7% for GWW Co. Conversely, the competitor has a lower P/E ratio of 16, which leads to a higher earnings yield of 6.25%.

Thank you sir. I understand that if the PE is higher the earnings yield will be lower thank you for explaining, but 15 is a lower number than 16 so I don’t quite understand how the PE is higher than the competitor when the actual number is lower? I have seen another example where the answer is the other way around; DD Co’s P/E ratio is 12. Its competitor’s earnings yield is 10%. When comparing DD Co to its competitor, which of the following is correct? Earning yield - P/E ratio A Higher Higher B Higher Lower C Lower Higher D Lower Lower The correct answer is C and I understand this because DD CO’s PE is 12 and the competitor is 10, so the PE is higher and the yield will be lower

Honestly, I am also confused with same question, almost stuck. i dont understand how eanding yield can be lower for GWW when it is 6.7% compared to the 6.25% for competitor, Same way for GWW P/E is 15 while its 16 for the COmpetitors But answers says other way around,

This may seem counterintuitive, but it is because the earnings yield and P/E ratio are inversely related. The earnings yield is calculated by taking the reciprocal of the P/E ratio. So, if the P/E ratio is higher, the earnings yield will be lower, and vice versa. In this case, GWW Co has a higher P/E ratio of 15 compared to its competitor, which results in a lower earnings yield of 6.7% for GWW Co. Conversely, the competitor has a lower P/E ratio of 16, which leads to a higher earnings yield of 6.25%. Along with DD Co’s P/E ratio is 12. Its competitor’s earnings yield is 10%. So that means the competition has a PE ratio of 10 - 1/0.10 Whilst DD has an earnings yield of 8.33 - 1/12 When comparing DD Co to its competitor, which of the following is correct? Earning yield – P/E ratio A Higher Higher B Higher Lower C Lower Higher D Lower Lower The correct answer is C and I understand this because DD CO’s PE is 12 and the competitor is 10, so the PE is higher and the yield will be lower