A.
Earnings per share:
Earnings per share represent the amount of income earned per share of outstanding common stock in a period. This ratio is used for analyzing the profitability of company’s stockholders’.
The following formula can be used to calculate earnings per share:
To compute: Earnings per share of Incorporation A and company W.
B.
To identify: The company which appears to be more profitable on the basis of earnings per share.
C.
To explain: The possible reasons behind the differences between the Incorporation A and Company W’s market price per share and earnings price per share.
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Chapter 12 Solutions
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- Ratio of Liabilities to Stockholders’ Equity CompareAmazon.com to Best Buy Obj.6 Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. We will use Amazon as a continuing company exercise to reinforce the various tools and techniques for analyzing financial statements. We will begin with the ratio of liabilities to stockholders’ equity. Ratios can be used to compare companies in the same industry. For Amazon, there are a number of competitors that sell media, electronic, and other merchandise. Best Buy, Inc. (BBY) is one such company. The following total liabilities and stockholders’ equity information (in millions) is provided for Amazon and Best Buy for the end of a recent year:Amazon Best BuyTotal assets $64,747 $13,519Total liabilities 51,363 9,141Total stockholders' equity 13,384 4,378a. Compute the ratio of liabilities to stockholders' equity for each company. Round to two decimal places.b. What conclusions regarding the margin of protection to creditors…arrow_forwardUse the data below to perform a relative valuation between Dunkin Donuts and Starbucks Dunkin' Donuts Starbucks Corporation Price Per Share $48.85 $53.93 Earnings Per Share $1.44 $1.81 Price to Earnings 34.0 29.8 Market Capitalization 4.5 B 78.8 B According to the information above, which company is undervalued? Why?arrow_forwardDuPont system of analysis Use the following financial information for AT&T and Verizon to conduct a DuPont system of analysis for each company. AT&T Sales $164,000 Earnings available for common stockholders 13,333 Total assets 403,721 Stockholders' equity 124,210 a. Which company has the higher net profit margin? Higher asset turnover? b. Which company has the higher ROA? The higher ROE? c. Which company has the higher financial leverage multiplier? a. Net profit margin (Round to three decimal places.) AT&T Net profit margin Verizon C Verizon $131,868 13.708 244,180 24,032arrow_forward
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