Financial statements for Harwich Company for the most recent year appear below: The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the year. A $0.75 per share dividend was declared and paid during the year. On December 31, Harwich Company's common stock was trading at $24.00 per share.
-Harwich Company's price-earnings ratio at December 31 was closest to:
A)3.00
B)8.25
C)8.00
D)7.25

Question

Financial statements for Harwich Company for the most recent year appear below:   The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the year. A $0.75 per share dividend was declared and paid during the year. On December 31, Harwich Company's common stock was trading at $24.00 per share.
-Harwich Company's price-earnings ratio at December 31 was closest to:
A)3.00 
B)8.25 
C)8.00 
D)7.25

Quizplus · Accepted Answer

Number of common shares outstanding = Common stock F1F1F1S1F1F1F10 Par value
= $20 F1F1F1S1F1F1F10 $1 per share = 20 shares
Earnings per share = (Net Income - Preferred Dividends)
F1F1F1S1F1F1F10 Average number of common shares outstanding
= ($60 - $0)F1F1F1S1F1F1F10 (20 shares + 20 shares)/2 = $3.00 per share
Price-earnings ratio = Market price per share F1F1F1S1F1F1F10 Earnings per share
= $24.00 F1F1F1S1F1F1F10 $3.00 = 8.00

Financial Statements for Harwich Company for the Most Recent Year