A company has net income of $850,000.It also has 125,000 weighted-average common shares outstanding and a market value per share of $115.The company's price-earnings ratio is equal to:
A)16.9
B)14.7
C)92.0
D)13.5
E)8.0

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the market value per share by the earnings per share (EPS). EPS is calculated as net income divided by the weighted-average common shares outstanding. EPS = $850,000 / 125,000 = $6.80. The price-earnings ratio = $115 / $6.80 = 16.9.

A Company Has Net Income of $850,000