Stone,Inc.had 2012 earnings of $1,500,000.Cash dividends per share were $0.50.The company had an average of 1,225,000 shares of common stock outstanding.The market price of the stock at the end of the year was $6.00 per share.What was the price-earnings ratio for Stone,Inc.?

Question

Quizplus · Accepted Answer

The earnings per share (EPS) can be calculated by dividing the total earnings by the number of outstanding shares:

EPS = Earnings / Number of shares
EPS = $1,500,000 / 1,225,000
EPS = $1.22

The price-earnings ratio (P/E ratio) can be calculated by dividing the market price per share by the earnings per share:

P/E ratio = Market price per share / EPS
P/E ratio = $6.00 / $1.22
P/E ratio = 4.92

Therefore, the correct answer is B) 4.92.

Stone,IncHad 2012 Earnings of $1,500,000