Dalmatian Corporation's annual report is as follows. $$\begin{array} { | l | r | r | }
\hline & \text { March 31, 2016 } & \text { March 31, 2017 } \
\hline \text { Net Income } & \$ 360,000 & \$ 428,500 \
\hline \text { Preferred Dividends } & 0 & 0 \
\hline \text { Total Stockholders' Equity } & \$ 4,250,000 & \$ 5,102,000 \
\hline \text { Stockholders' Equity attributable to Preferred } & & \
\text { Stock } & 0 & 0 \
\hline \text { Number of Common Shares Outstanding } & 290,464 & 196,168 \
\hline
\end{array}$$ If the current market price is $23 on March 31,2016,compute the price/earnings ratio on March 31,2017.(Round any intermediate calculations and your final answer to the nearest cent. )

Question

Dalmatian Corporation's annual report is as follows. $$\begin{array} { | l | r | r | } 
\hline & \text { March 31, 2016 } & \text { March 31, 2017 } \
\hline \text { Net Income } & \$ 360,000 & \$ 428,500 \
\hline \text { Preferred Dividends } & 0 & 0 \
\hline \text { Total Stockholders' Equity } & \$ 4,250,000 & \$ 5,102,000 \
\hline \text { Stockholders' Equity attributable to Preferred } & & \
\text { Stock } & 0 & 0 \
\hline \text { Number of Common Shares Outstanding } & 290,464 & 196,168 \
\hline
\end{array}$$ If the current market price is $23 on March 31,2016,compute the price/earnings ratio on March 31,2017.(Round any intermediate calculations and your final answer to the nearest cent. )

Quizplus · Accepted Answer

The price/earnings ratio is calculated by dividing the current market price by the earnings per share. The earnings per share is calculated by dividing the net income by the number of common shares outstanding.On March 31, 2016, the net income was $360,000 and the number of common shares outstanding was 290,464. Therefore, the earnings per share was $360,000 / 290,464 = $1.24.On March 31, 2017, the net income was $428,500 and the number of common shares outstanding was 196,168. Therefore, the earnings per share was $428,500 / 196,168 = $2.18.The current market price on March 31, 2017 is $23. Therefore, the price/earnings ratio on March 31, 2017 is $23 / $2.18 = 10.55.

Dalmatian Corporation's Annual Report Is as Follows If the Current Market Price Is $23 on March 31,2016,compute