A company has a market value per share of $73.00. Its net income is $1,750,000 and the weighted-average number of shares outstanding is 350,000. The company's price-earnings ratio equals:
A) 20.9.
B) 4.2.
C) 14.6.
D) 20.0.
E) 6.8.

Question

Quizplus · Accepted Answer

The earnings per share (EPS) can be calculated as net income divided by the number of shares outstanding: 
EPS = $1,750,000 ÷ 350,000 = $5.

The price-earnings ratio (P/E ratio) can be calculated as market value per share divided by EPS: 
P/E ratio = $73 ÷ $5 = 14.6.

Therefore, the answer is choice C, 14.6.

A Company Has a Market Value Per Share of $73