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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Price-earnings ratio; dividend yield

The table that follows shows the stock price, earnings per share, and dividends per share for three companies for a recent year:

  Price Earnings per Share Dividends per Share
Deere & Company $ 82.29 $ 4.98 $2.40
Alphabet (Google) 735.72 24.58 0.00
The Coca-Cola Company 44.60 1.66 1.40
  1. a. Determine the price-earnings ratio and dividend yield for the three companies. Round ratios and percentages to one decimal place as appropriate.
  2. b. Explain the differences in these ratios across the three companies.

(a)

To determine

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

Given info: Items from financial statements

(1)

To determine: Price earnings ratio

Explanation

Price/earnings ratio is used to determine the profitability of a company. This ratio is abbreviated as P/E.

Formula:

Price/earnings ratio

(b)

To determine

To explain: The differences in the ratio across the companies.

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