D Chapter 9 Assignment x C ezto.mheducation.com/hm.tpx value: 4.00 points Select
ID: 2537704 • Letter: D
Question
D Chapter 9 Assignment x C ezto.mheducation.com/hm.tpx value: 4.00 points Selected data for Putin Company for 2014 and additional information on industry averages follow Earnings (net income) $ 195,600 Preferred stock (13,200 shares at $50 par, 49) Common stock (45,000 shares no par, market value 556) Retained earnings $ 660,000 510,000 562,500 $1,732,500 Less: Treasury stock Preferred (1,800 shares) Common (1,800 shares) $54,000 24,000 78,000 Total stockholders' equity $1,654,500 Industry averages Earnings per share 5.20 Price-earnings ratio Return on equity 9.50 11.20 % Required a. Calculate the Putin Company's ratios. (Round youranswers to 2 decimal places.) Price-earnings ratio Return on equity eBook & Resources 0 Type here to searchExplanation / Answer
Price earning ratio
P/E ratio = market value per share / earnings per share
Net income - Preferred dividend
= 195600-22800
Common stock net earnings = 172800
outstanding equity shares 43200 (45000 – 1800 treasury stock shares)
Earning Per Share(EPS) = 172800/ 43200 = 4
Price Earning ratio = 56÷4 = 14 times
Return on Equity
ROE = net income / shareholders’ equity
ROE = (172800/1048500)*100
ROE = 16.48%
Notes: Shareholders’ equity = Common stock 510000 +retained earnings 562500 – common treasury stock 24000 = 1048500
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