Question

SMOLIRA GOLF CORP. 2014 and 2015 Balance Sheets
Assets									Liabilities and Owners’ Equity
	2014				2015					2014				2015
Current assets									Current liabilities
Cash	$	24,066			$	24,300			Accounts payable	$	23,384			$	27,300
Accounts receivable		12,648				15,400			Notes payable		13,000				11,000
Inventory		25,642				27,300			Other		11,771				16,700
Total	$	62,356			$	67,000			Total	$	48,155			$	55,000
									Long-term debt	$	71,000			$	82,000
									Owners’ equity
									Common stock and paid-in surplus	$	42,000			$	42,000
									Accumulated retained earnings		227,896				250,000
Fixed assets
Net plant and equipment	$	326,695			$	362,000			Total	$	269,896			$	292,000
Total assets	$	389,051			$	429,000			Total liabilities and owners’ equity	$	389,051			$	429,000

SMOLIRA GOLF CORP. 2015 Income Statement
Sales					$	369,630
Cost of goods sold						253,500
Depreciation						46,500
Earnings before interest and taxes					$	69,630
Interest paid						14,500
Taxable income					$	55,130
Taxes (20%)						11,026
Net income					$	44,104
Dividends	$	22,000
Retained earnings		22,104

Smolira Golf Corp. has 20,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2015 was $35.

  

What is the price-earnings ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

  

Price-earnings ratio

times

  

What are the dividends per share? (Round your answer to 2 decimal places, e.g., 32.16.)

  

Dividends

per share

  

What is the market-to-book ratio at the end of 2015? (Round your answer to 2 decimal places, e.g., 32.16.)

  

Market-to-book ratio

times

   

If the company’s growth rate is 9 percent, what is the PEG ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

  

PEG ratio

times

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Answer 1

1. P/E ratio is the ratio which determines the premium on which the stock price is quoting in the market as compared to its earnings per share. It is calculated as follows:

P/E ratio = Market Price / Earnings per share or EPS

EPS = Net income / number of shares out standing

The P/E ratio of Smolira golf corp is as follows:

EPS = $44,104 / 20,000 shares

         = $2.20

P/E ratio = $35 / $2.20

             = 15.90

2. Dividends per share of the company can be calculated by dividing the dividend amount paid by number of shares outstanding. Dividend paid by smolira is as follows:

Dividend per share = Dividend amount / number of shares

                           = $22,000 / 20,000 shares

                           = $1.1

3. Market to book value ratio depicts the premium paid by the market to a company's share price as compared to its book value. It is calculated as follows:

   Market price per share / book value per share

Market price = $35

Book value = Stockholder's Equity / number of shares

                 = $2,92,000 / 20,000 shares

                 = $14.6

Market to Book value ratio = $35 / $14.6

                                      = $2.39

4. PEG ratio is the PE to growth ratio. Which estimates the premium paid for the stock and the growth rate which is provided by the company. It is calculated as follows:

PEG ratio = PE Ratio / Growth rate of the firm

               = 15.90 / 9 = 1.76