Asked Dec 23, 2019

A company reports the following:
Net income                                                    $185,000
Preferred dividends                                        $25,000
Shares of common stock outstanding             100,000
Market price per share of common stock        $20
a. Determine the company’s earnings per share on common stock.
b. Determine the company’s price-earnings ratio. Round to one decimal place.


Expert Answer

Step 1

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Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Step 2

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a. Determine the company's eamings per share on common stock. Net income -Preferred dividend Earnings per share = Weighted average number of comm on of common shares outstanding S185,000 – $25,000 100,000 S60,000 100,000 = $1.60


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