Katrina's Fury has $697,400 in sales. The profit margin is 3.4 % and the firm has 12,500 shares of stock outstanding. The market price per share is $33. What is the price-earnings ratio?
A) 15.8
B) 16.2
C) 16.6
D) 17.1
E) 17.4

Question

Quizplus · Accepted Answer

First, calculate the net profit by applying the profit margin to the sales: $697,400 * 3.4% = $23,711.6. Then, find the earnings per share (EPS) by dividing the net profit by the number of shares: $23,711.6 / 12,500 = $1.896928. Finally, calculate the price-earnings (P/E) ratio by dividing the market price per share by the EPS: $33 / $1.896928 ≈ 17.4.

Katrina's Fury Has $697,400 in Sales