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23 January, 05:28

The following amounts were taken from the financial statements of Ando Company: 2017 2016 Total assets $800,000 $1,000,000 Net sales 720,000 650,000 Gross profit 352,000 320,000 Net income 108,000 117,000 Weighted average number of common shares outstanding 90,000 90,000 Market price of common stock $42 $39 The price-earnings ratio for 2017 is

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  1. 23 January, 05:57
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    35 times

    Explanation:

    The price-earnings ratio is the financial ratio that compares the market price of a share with its earnings in order to determine whether the share gives earnings that makes it a good buy.

    Price-earnings ratio=market price per share/earnings per share

    market price per share for 2017 is $42

    earnings per share=net income-dividends/average common stock outstanding

    net income is $108,000

    dividends is nil

    average number of common stock is 90,000

    earnings per share=$108,000-$0/90,000=$1.2

    price earnings ratio=$42/$1.2=35 times
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