Use the following information for questions
During 2016, Pattar Corp.reported after-tax profit of $450,000 and paid $75,000 in common dividends.The weighted average number of common shares issued in 2016 was 150,000.There are no preferred shares issued.At year end, Pattar's common shares are selling for $60 per share on the Toronto Stock Exchange.
-Pattar's price-earnings ratio is
A)120 times.
B)24 times.
C)20 times.
D)3 times.

Question

Use the following information for questions 
During 2016, Pattar Corp.reported after-tax profit of $450,000 and paid $75,000 in common dividends.The weighted average number of common shares issued in 2016 was 150,000.There are no preferred shares issued.At year end, Pattar's common shares are selling for $60 per share on the Toronto Stock Exchange.
-Pattar's price-earnings ratio is
A)120 times.
B)24 times.
C)20 times.
D)3 times.

Quizplus · Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the market price per share by the earnings per share (EPS). EPS is calculated as after-tax profit divided by the weighted average number of common shares. EPS = $450,000 / 150,000 = $3. The market price per share is $60. Therefore, the P/E ratio = $60 / $3 = 20 times.

Use the Following Information for Questions