The following information is available for Taylor Company:
Which of the following statements is correct?
A) The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2012.
B) The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2012.
C) The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2012.
D) The market price per share and the earnings per share are not statistically related to each other.

Question

The following information is available for Taylor Company:  
Which of the following statements is correct?
A) The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2012. 
B) The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2012. 
C) The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2012. 
D) The market price per share and the earnings per share are not statistically related to each other.

Quizplus · Accepted Answer

The information provided in the code TB2083_00 represents the price-earnings ratio (P/E ratio) for Taylor Company. The P/E ratio is calculated by dividing the market price per share by the earnings per share. Therefore, option A is correct as it states that the P/E ratio is 20, meaning that the stock is selling for 20 times the earnings per share at the end of 2012. Option B and C are incorrect as they provide incorrect values for the P/E ratio. Option D is also incorrect as the relationship between market price per share and earnings per share is precisely what is measured by the P/E ratio.

The Following Information Is Available for Taylor Company