Question

Little Book LTD has total assets of $860 000. There are 75

000 shares of stock outstanding, total book value of $750 000 with a
market value of $12 a share. The firm has a profit margin of 6.5% and a
total asset turnover of 1.5. Required:
a) Calculate the company’s EPS?
b) What is the market –to- book ratio?

Answer 1

a)Little book LTD earning per share is $1.118 per share.

Step-by-step explanation:

To calculate earning per share we will use following formula:

`(net income)/(weighted average shares outstanding)`

Now to find net income we will take help of asset turnover ratio :
`(net sales)/(total asset)`

Asset turnover ratio =
`(x)/(860000)`

`\begin{align}(x)/($86000)\end{align}`1.5 × $860000 = x

x (net sales) = $1290000

Outstanding shares = 75000 shares

So Net Income = $1290000×.065

= $83850

Now Earning per share =
`(83850)/(75000)`

Earning per share = $1.118

b) Market to Book Ratio will be 1.2 for Little Book LTD.

Step-by-step explanation:

Market to Book Ratio =
`(Market Capitalization)/(Total Book Value)`

Market Capitalization = $ 75000× $ 12

= $900000

So, Market To Book Ratio =
`(900000)/(750000)`

Market To Book Ratio = 1.2