Bernice's has $823,000 in sales. The profit margin is 4.2 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $16.50. What is the price-earnings ratio?
A) 3.58
B) 3.98
C) 4.32
D) 3.51
E) 4.27

Question

Quizplus · Accepted Answer

The profit is calculated as $823,000 * 4.2% = $34,566. Earnings per share (EPS) is profit divided by the number of shares, so EPS = $34,566 / 7,500 = $4.6088. The price-earnings (P/E) ratio is the market price per share divided by EPS, so P/E = $16.50 / $4.6088 ≈ 3.58.

Bernice's Has $823,000 in Sales