Montreal Electronics has the following data available:
$\begin{array}{lll}
&&&&&& 2013 & 2012 \
\text { Net Income } &&&&&& \$ 90 & \$ 80 \
\text { Preferred Dividends Per Share }&&&&&& \$ 0 & \$ 0
\end{array}$
$\text{Weighted Average Number of Common}$
$\begin{array} { c l l }
\text { Shares Outstanding During Year } & 200 & 200 \
\text { Annuel Common Dividende Per Share } & \$ 1.40 & \$ .20 \
\text { Closing Market Price Common Stcck, 12/31 } & \$ 9.00 & \$ 6.06
\end{array}$
What is the price-earnings ratio for Montreal Electronics in 2013? Has the price-earnings ratio improved or not improved since 2012?
A)15,not improved
B)15,improved
C)15,unknown
D)20,improved
E)20,not improved

Question

Montreal Electronics has the following data available: 
$\begin{array}{lll}
&&&&&& 2013 & 2012 \
 \text { Net Income } &&&&&& \$ 90 & \$ 80 \
\text { Preferred Dividends Per Share }&&&&&& \$ 0 & \$ 0
\end{array}$ 
$\text{Weighted Average Number of Common}$
$\begin{array} { c l l } 
\text { Shares Outstanding During Year } & 200 & 200 \
\text { Annuel Common Dividende Per Share } & \$ 1.40 & \$ .20 \
\text { Closing Market Price Common Stcck, 12/31 } & \$ 9.00 & \$ 6.06
\end{array}$ 
What is the price-earnings ratio for Montreal Electronics in 2013? Has the price-earnings ratio improved or not improved since 2012?
A)15,not improved
B)15,improved
C)15,unknown
D)20,improved
E)20,not improved

Quizplus · Accepted Answer

The price-earnings (P/E) ratio for 2013 is calculated by dividing the closing market price of the common stock by the earnings per share (EPS). The EPS is calculated by dividing the net income by the weighted average number of common shares outstanding. For 2013, the EPS is $90 / 200 = $0.45. The P/E ratio for 2013 is then $9.00 / $0.45 = 20. For 2012, the EPS is $80 / 200 = $0.40, and the P/E ratio is $6.06 / $0.40 = 15.15. Since the P/E ratio increased from 15.15 in 2012 to 20 in 2013, the P/E ratio has improved.

Montreal Electronics Has the Following Data Available Weighted Average Number of Common\text{Weighted Average Number of Common}Weighted Average Number of Common

Montreal Electronics Has the Following Data Available $\text{Weighted Average Number of Common}$