Question

ALPHA CORP. 2018 Income Statement Sales                           $311,153 Cost of Goods Sold      

ALPHA CORP.

2018 Income Statement

Sales                           $311,153

Cost of Goods Sold          $142,555

Depreciation               $ 15,000

EBIT                          $153,598

Interest paid               $ 12,000

Taxable Income         $141,598

Taxes                          $ 42,479

Net Income                $ 99,118

Dividends                                       $ 40,000

Additions to retained Earnings                     $ 59,118

Capital/Equity                                        $120,000

XYZ Corp. has 10,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2018 was $96.

  1. What is the price-earnings ratio?
  2. What is the price-sales ratio?
  3. What are the dividends per share?
  4. What is the market-to-book ratio at the end of 2018?
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Homework Answers

Answer #1

(1)-The Price-earnings ratio

Price-earnings ratio = Market price per share / Earnings per share

= $96.00 / [$99,118 / 10,000 Shares]

= $96.00 / $9.91

= $9.69 Times

(2)-The Price-sales ratio

Price-sales ratio = Market price per share / Sales per share

= $96.00 / [$311,153 / 10,000 shares]

= $96.00 / $31.12

= 3.09 Times

(3)-The Dividends per share

Dividends per share = Dividend paid / Number of shares

= $40,000 / 10,000 Shares

= $4.00 per share

(4)-The Market-to-book ratio at the end of 2018

The Market-to-book ratio at the end of 2018 = Market price per share / Book value per share

= Market price per share / [Equity / Number of shares]

= $96.00 / [$120,000 / 10,000 Shares]

= $96.00 / $12.00

= 8.00 Times

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