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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Debt and price-earnings ratios
The Home Depot. Inc. (HD) operates over 2.200 home improvement retail stores and is a competitor of Lowe's (LOW).
The following data (in millions) were adapted from recent financial statements of The Home Depot.


Compare the results from parts (6) and (7). Comment on any differences.

To determine

Concept Introduction:

Price Earnings Ratio:

The price earnings ratio shows the relationship between price of the share and earnings per share. It is calculated with the help of following formula:

  Price Earnings Ratio=Market price per shareEarnings per share

To Indicate:

The Comment on the Price Earnings ratios

Explanation

The Price Earnings ratio for year 2 is calculated as follows:

  Price Earnings Ratio=Market price per shareEarnings per share

= 104.43/4.74

=22

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