On December 31,2013 and 2014,Tomlin Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and outstanding.Additional information:

The price-earnings ratio on common stock at December 31,2014,was
A)10 to 1.
B)12 to 1.
C)14 to 1.
D)16 to 1.

Question

On December 31,2013 and 2014,Tomlin Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and outstanding.Additional information:

The price-earnings ratio on common stock at December 31,2014,was
A)10 to 1. 
B)12 to 1. 
C)14 to 1. 
D)16 to 1.

Quizplus · Accepted Answer

To calculate the price-earnings ratio on common stock, we need to know the market price per share and the earnings per share for common stock. We have been given the market price per share of the common stock as $60 and the earnings per share for common stock as $5.

Therefore, the price-earnings ratio on common stock can be calculated as follows:

Price-Earnings Ratio = Market Price per Share / Earnings per Share 
= $60 / $5 
= 12 to 1

Hence, the correct choice is B) 12 to 1.

On December 31,2013 and 2014,Tomlin Corporation Had 100,000 Shares of Common