A company has a price to sales ratio of 1.0, annual sales of $1 billion and 100 million shares of common stock outstanding. Its stock price is:

Question

Quizplus · Accepted Answer

The price to sales ratio is calculated as the market capitalization divided by the annual sales. Given a price to sales ratio of 1.0 and annual sales of $1 billion, the market capitalization is also $1 billion. With 100 million shares outstanding, the stock price is $1 billion / 100 million shares = $10 per share.

A Company Has a Price to Sales Ratio of 1