If a share of stock in Skylight Chili sells for $75, the retained earnings per share are $5, and the divided per share is $2, then the price-earnings ratio is 15.

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated as the stock price divided by earnings per share (EPS). The EPS is not given directly, but can be calculated as the sum of retained earnings per share and dividend per share, which is $5 + $2 = $7. Therefore, the price-earnings ratio is $75 / $7 = 10.71, not 15.

If a Share of Stock in Skylight Chili Sells for $75