Question

Wilson, Inc., has a current stock price of $44.50. For the past year, the company had net income of $6,400,000, total equity of $21,610,000, sales of $39,300,000, and 4.4 million shares of stock outstanding.

A) What are earnings per share (EPS)?

B) What is the price earnings ratio?

C) What is the price sales ratio?

D) What is the book value per share?

E) What is the market-to-book ratio?

Answer 1

Step-by-step explanation:

The computations are shown below:

A. Earning per share

= Net income ÷ number of shares outstanding

= $6,400,000 ÷ 4,400,000 shares

= $1.45

B. Price earnings ratio

= Current stock price ÷ Earning per share

= $44.50 ÷ $1.45

= 30.69

C. Prices sales ratio

Price sales ratio = (Market price per share) ÷ (Total sales per share)

where,

Total sales per share = (Total sales) ÷ (Number of shares)

= $39,300,000 ÷ 4,400,000 shares

= 8.93

So, the price sales ratio = $44.50 ÷ $8.93

= 4.98 times

D. Book value per share

= Book value ÷ number of shares outstanding

= $21,610,000 ÷ 4,400,000 shares

= $4.91

E. Market-to-book ratio

Market to book ratio = (Market price per share) ÷ (book value per share)

= $44.50 ÷ $4.91

= 9.06