Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding.The firm has a profit margin of 6 percent and a price-sales ratio of 1.20.What is the firm's price-earnings ratio?
A)14
B)16
C)18
D)20
E)22

Question

Quizplus · Accepted Answer

Price per share = 1.20 × ($220,000/10,000) = $26.40Earnings per share = ($220,000 × .06)/10,000 = $1.32Price-earnings ratio = $26.40/$1.32 = 20

Lassiter Industries Has Annual Sales of $220,000 with 10,000 Shares