A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of $126,400, a price-earnings ratio of 18.7, and a book v

Question

A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of $126,400, a price-earnings ratio of 18.7, and a book value per share of $7.92. What is the market-to-book ratio

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Mia 2 months 2021-10-13T08:39:23+00:00 1 Answer 0 views 0

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    2021-10-13T08:40:50+00:00

    Answer:

    The market-to-book ratio is 1.87

    Step-by-step explanation:

    From the data provided we have;

    Number of shares of stock outstanding = 160,000

    sales = $1.94million

    net income = $126,400

    price earnings ratio = 18.7

    book value per share = $7.92

    To determine the market-to-book ratio, we solve;

    earnings per share = net income ÷  number of shares of stock outstanding

    = $126400 ÷ 160000

    = $0.79

    price per share = earnings per share ÷ price earnings ratio

    = 0.79 x 18.7

    = $14.773

    market-to-book ratio = price per share ÷ book value per share

    = $14.773 ÷ $7.92

    market-to-book ratio = 1.87

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