A company has earnings per share of $1.51, a price-book ratio of 5.33, a share price of $48, and 45,000 shares outstanding. What is the company's return on equity?

Question

Quizplus · Accepted Answer

First, we need to calculate the book value per share:

Book Value per Share = Share Price / Price-to-Book Ratio
Book Value per Share = $48 / 5.33
Book Value per Share = $9.00

Next, we can use the earnings per share and the book value per share to calculate the return on equity:

Return on Equity = (Earnings per Share / Book Value per Share) x (Book Value per Share / Share Price) x 100%
Return on Equity = ($1.51 / $9.00) x ($9.00 / $48) x 100%
Return on Equity = 16.8%

Therefore, the answer is A) 16.8%.

A Company Has Earnings Per Share of $1