Dellf's has a profit margin of 3.8 percent on sales of $287,200.The firm currently has 5,000 shares of stock outstanding at a market price of $7.11 per share.What is the price-earnings ratio?
A)3.26
B)8.02
C)11.50
D)5.93
E)12.84

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the market price per share by the earnings per share. The earnings per share is calculated by dividing the net income by the number of shares outstanding. In this case, the net income is $287,200 * 0.038 = $10,897.60. The earnings per share is $10,897.60 / 5,000 = $2.18. The price-earnings ratio is $7.11 / $2.18 = 3.26.

Dellf's Has a Profit Margin of 3