# Earnings per share and price-earnings ratio A company reports the following: Net income $410,000 Preferred dividends 560,000 Share of common stock outstanding 50,000 Market price per share of common stock$84 a. Determine the company’s earnings per share on common stock. b. Determine the company’s price-earnings ratio. Round to one decimal place.

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

#### Solutions

Chapter
Section
Chapter 17, Problem 17.11BPE
Textbook Problem

## Earnings per share and price-earnings ratioA company reports the following: Net income $410,000 Preferred dividends 560,000 Share of common stock outstanding 50,000 Market price per share of common stock$84 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 Solution

a)

To determine

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

To calculate: Earnings per share.

Given info: Net income, preference dividends, shares of common stock outstanding

### Explanation of Solution

Explanation

A portion of profit that an individual earns from each share is referred to earnings per share.

Formula:

Earnings per share

Expert Solution

b)

To determine

To calculate: Price earnings ratio

Given info: Earnings per share (Requirement 1) and Market price per share

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