Question

Ames, Inc., has a current stock price of $45.00. For the past year, the company had net income of $6,350,000, total equity of $21,600,000, sales of $39,200,000, and 4.3 million shares of stock outstanding.

What are earnings per share (EPS)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Earnings per share            $

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

Price−earnings ratio              times

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

Price−sales ratio              times

What is the book value per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Book value per share            $

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

Market-to-book ratio             times

Answer 1

Answer to Part 1.

Earnings per Share = Net Income / Stock Outstanding
Earnings per Share = $6,350,000 / 4,300,000
Earnings per Share = $1.48

Answer to Part 2.

Price Earnings Ratio = Price per Share / Earnings per Share
Price Earnings Ratio = $45/ $1.48
Price Earnings Ratio = 30.41 times

Answer to Part 3.

Price-Sales Ratio = Price per Share / Sales per Share
Sales per Share = Total Sales / Stock Outstanding
Sales per Share = $39,200,000 / 4,300,000
Sales per Share = $9.1163

Price-Sales Ratio = $45.00 / $9.1163
Price-Sales Ratio = 4.94 times

Answer to Part 4.

Book Value per Share = Total Stockholders’ Equity / Stock Outstanding
Book Value per Share = $21,600,000 / 4,300,000
Book Value per Share = $5.02

Answer to Part 5.

Market-to-Book Ratio = Market Capitalization / Total Stockholders’ Equity

Market Capitalization = Stock Outstanding * Stock Price per Share
Market Capitalization = 4,300,000 * $45.00
Market Capitalization = $193,500,000

Market-to-Book Ratio = $193,500,000 / $21,600,000
Market-to-Book Ratio = 8.96 times