Market-value ratio: RTR Company has reported a profit of $812,425 for the year. The company's share price is $13.45, and the company has 312,490 shares outstanding. Calculate the company's price-earnings ratio.

Question

Quizplus · Accepted Answer

Market-value ratio or price-earnings ratio is calculated by dividing the stock price per share by the earnings per share (EPS).

EPS = Net Income / Number of Shares Outstanding
EPS = $812,425 / 312,490 
EPS = $2.60

Price-earnings ratio = Stock Price per Share / EPS 
Price-earnings ratio = $13.45 / $2.60
Price-earnings ratio = 5.17 times

Therefore, the correct choice is C: 5.17 times.

Market-Value Ratio: RTR Company Has Reported a Profit of $812,425