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11 September, 04:37

14. Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding. The firm has a profit margin of 7.5 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio?

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  1. 11 September, 04:56
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    Price earning ratio is 16

    Explanation:

    Profit Margin = (Net profit / Net Sales) x 100

    7.5% = Net profit / $220,000

    Net Profit = $220,000 x 7.5%

    Net Profit = $16,500

    Earning Per share = $16,500 / 10,000 = $1.65 per share

    Price-sales ratio = Market value / Sales value

    1.20 = Market value / 220,000

    1.20 x 220,000 = Share price

    Share price = 264,000 / 10,000 =

    Share price = 26.40

    Price Earning Ratio = 26.40 / 1.65 = 16
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Home » Business » 14. Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding. The firm has a profit margin of 7.5 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio?
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