The following amounts were taken from the financial statements of Ando Company: $\begin{array}{lrr}&2014&2013\
\text { Total assets } & \$ 800,000 & \$ 1,000,000 \
\text { Net sales } & 720,000 & 650,000 \
\text { Gross profit } & 352,000 & 320,000 \
\text { Net income } & 144,000 & 11,000 \
\text { Weighted average number of } & &\
\text { common shares outstanding }&90,000 & 90,000 \
\text { Market price of common stock }&\$ 48 & \$ 39
\end{array}$ The price-earnings ratio for 2014 is

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated as the market price per share divided by the earnings per share (EPS). For 2014, EPS is $ \frac{144,000}{90,000} = 1.6 $. The price-earnings ratio is $ \frac{48}{1.6} = 30 $ times.

The Following Amounts Were Taken from the Financial Statements of Ando