On December 31, Sulfur Corporation has the following data available: Net Income $ 140 comma 000 Market price of one share of common stock $ 6 Preferred dividends 40 comma 000 Weightedminusaverage number of shares of common stock outstanding 20 comma 000 shares Total common stockholders' equity at the beginning of the year 370 comma 000 Total common stockholders' equity at the end of the year 300 comma 000 What is the priceminusearnings ratio?

Question

Yadira Cisneros

Business

25 September, 12:00

On December 31, Sulfur Corporation has the following data available: Net Income $ 140 comma 000 Market price of one share of common stock $ 6 Preferred dividends 40 comma 000 Weightedminusaverage number of shares of common stock outstanding 20 comma 000 shares Total common stockholders' equity at the beginning of the year 370 comma 000 Total common stockholders' equity at the end of the year 300 comma 000 What is the priceminusearnings ratio?

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Answers (1)

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Stokes · Answer 1

Earnings per share

= Net income - Preferred dividend

No of common stocks outstanding

= $140,000 - $40,000

300,000 shares

= $0.33 per share

Price-earnings ratio

= Market price per share

Earnings per share

= $6.00

$0.33

= 18

Explanation:

There is need to calculate earnings per share, which is net income minus preferred dividend divided by number of common stocks outstanding at the end of the year. Finally, we will calculate price-earnings ratio, which is the ratio of market price per share to earnings per share.