Respuesta :
The price to earning ratio will be 18.8 with $94 market price per share and $5 earnings per share.
Write a short note on price to earning ratio.
The ratio for valuing a firm that compares its current share price to its earnings per share is called the price-to-earnings ratio (EPS). The price multiple or earnings multiple are other names for the price-to-earnings ratio.
Investors and analysts use P/E ratios to assess the comparative value of a company's shares in an apples-to-apples comparison. It can also be used to compare a company to its past performance or to compare broad markets over time or to one another. P/E estimates can either be forecast or trailing (backward-looking).
To solve the question :
Net income (A) = $930,000
Weighted-average common shares outstanding (B) = 186,000
Earnings per share (C) = Net income (A)/ Weighted-average common shares outstanding (B)
= (C = A/B)
= $930,000 / 186,000
Earnings per share = $5
Market price per share (D) = $94
Price earnings ratio = Market price per share (D) / Earnings per share (C)
= (E = D/C)
= $94 / $5
= 18.8
Hence, price earnings ratio is 18.8.
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