Settles Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $5,400.The market price of common stock at the end of Year 2 was $5.89 per share. The company's price-earnings ratio for Year 2 is closest to:

Question

Settles Corporation has provided the following financial data:   Dividends on common stock during Year 2 totaled $5,400.The market price of common stock at the end of Year 2 was $5.89 per share. The company's price-earnings ratio for Year 2 is closest to:

Quizplus · Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $18,400 ÷ 60,000 shares = $0.31 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $240,000 ÷ $4 per share = 60,000 shares
Price-earnings ratio = Market price per share ÷ Earnings per share
= $5.89 ÷ $0.31 = 19.00 (rounded)

Settles Corporation Has Provided the Following Financial Data