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Financial Accounting
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:
- a. Determine the price-earnings ratio and dividend yield for the three companies. Round ratios and percentages to one decimal place as appropriate.
- b. Explain the differences in these ratios across the three companies.
(a) (1)
Determine Price earnings ratio.
Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.
Price/earnings ratio is used to determine the profitability of a company. This ratio is abbreviated as P/E.
Formula:
Calculate Price earnings ratio for D&C.
Calculate Price earnings ratio for A
(2)
Determine Dividend yield.
(b)
Explain the differences in the ratio across the companies.
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