Question

ABC, Inc. reported retained earnings for the year just ended of $638,000. The firm paid out $65,000 in cash dividends, and it has ending total equity of $7.33 million.

a.	If the company currently has 700,000 shares of common stock outstanding, what are earnings per share? Dividends per share? What is book value per share? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
b.	If the stock currently sells for $30.30 per share, what is the market-to-book ratio? The price-earnings ratio? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
c.	If total sales were $10.63 million, what is the price-sales ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

a)
Net profit = Dividends + retained earnings
= $65,000 + $638,000
= $703,000.

Earnings per share = Net profit / Number of shares outstanding
= $703,000 / 700,000
= $1.00

Dividend per share = Dividend / Number of shares outstanding
= $65,000 / 700,000
= $0.09

Book value per share = Ending total equity / Number of shares outstanding
= $7,330,000 / $700,000
= $10.47

b)
Market to book ratio = Market price / book price
= $30.30 / $10.47
= 2.89 times

Price earnings ratio = Price / EPS
= $30.30 / $1.00
= 30.17 times

c)
Price to sales ratio = price per share/ Sales per share
= $30.30 / ($10,630,000 / 700,000)
= $30.30 / $15.18571429
= 1.9952 times or 2.00 times