Question

Rossdale, Inc., had additions to retained earnings for the year just ended of $641,000. The firm paid out $50,000 in cash dividends, and it has ending total equity of $7.36 million.

1. If the company currently has 730,000 shares of common stock outstanding, what are:
a. Earnings per share?
b. Dividends per share?
c. Book value per share? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
2. lf he stock currently sells or $30.60 per share, what is:
a. the market-to-book ratio?
b. the price earnings ratio?
3. If total sales were $10.66 million, what is the price-sales ratio?

Answer 1

1. a. Earnings per share:

= Total earnings / No. of shares

= (Addition to retained earnings + Dividends) / No. of shares

= (641,000 + 50,000) / 730,000

= $0.95

b. Dividends per share:

= Dividends / No. of shares

= 50,000 / 730,000

= $0.07

c. Book Value per share:

= Ending total equity / No. of shares

= 7,360,000 / 730,000

= $10.08

2. a. Market to book ratio

= Market price / Book value

= 30.60 / 10.08

= 3.06 times

b. Price - earnings ratio:

= Market price / Earnings per share

= 30.60 / 0.95

= 32.21 times

3. Price - sales ratio

= Market value of equity / Sales

= (30.60 * 730,000 shares) / 10,660,000

= 2.1 times