Question

The following information is provided for Apolis Inc.

Total common stockholders' equity on Dec. 31, 2020 $302,000
Total common stockholders' equity on Dec. 31, 2019 $288,000
Sales, 2020 $165,000
Total assets $605,000
Common shares outstanding, 2020 50,000
Dividends declared and paid, 2020 $6,000
Market price per share, Dec. 31, 2020 $21
What is the company’s price-to-earnings ratio?

Answer 1

To calculate the price-to-earnings (P/E) ratio, we need the earnings per share (EPS) for the company. The EPS is calculated by dividing the net income by the number of common shares outstanding.

Net income for 2020 is not provided in the given information, so we cannot directly calculate the P/E ratio. However, if we assume that the net income is equal to the dividends declared and paid, which is $6,000, we can proceed with the calculation.

EPS = Net Income / Number of Common Shares Outstanding

EPS = $6,000 / 50,000

EPS = $0.12 per share

The P/E ratio is calculated by dividing the market price per share by the EPS.

P/E Ratio = Market Price per Share / EPS

P/E Ratio = $21 / $0.12

P/E Ratio = 175

Therefore, based on the given assumptions, the company's price-to-earnings (P/E) ratio is 175.