Problem 2-18 Price-earnings ratio [LO2]
Botox Facial Care had earnings after taxes of $280,000 in 2009 with200,000 shares of stock outstanding. The stock price was $30.80. In2010, earnings after taxes increased to $320,000 with the same200,000 shares outstanding. The stock price was $40.00.
(a) Compute earnings per share and the P/E ratio for 2009. The P/Eratio equals the stock price divided by earnings per share.(Enter only numeric values. Round intermediate calculations and EPSanswer to 2 decimal places. Omit the "$" sign in yourresponse.)
2009 Earnings per share $ P/E ratio
(b) Compute earnings per share and the P/E ratio for 2010. (Enter only numericvalues. Round intermediatecalculations and EPS answer to 2decimal places. Omit the "$" sign in your response.)
2010 Earnings per share $ P/E ratio
(c) Give a general explanation of why the P/E ratio changed. (Round yourintermediate calculations and final answers to 2 decimalplaces. Omit the "%" sign inyour response.)
The stock price (Click to select)decreasedincreased by% while EPS only (Click to select)decreasedincreased %.
Problem 2-17 Earnings per share and retained earnings [LO1, 3]
Quantum Technology had $640,000 of retained earnings on December31, 2010. The company paid common dividends of $30,000 in 2010 andhad retained earnings of $500,000 on December 31, 2009.
(a) How much did Quantum Technology earn during 2010? (Omit the "$" sign in your response.)
Earnings available to common stockholders $
(b) What would earnings per share be if 40,000 shares of common stockwere outstanding? (Roundyour answer to 2 decimal places. Omit the "$" sign in your response.)
Earnings per share $
Problem 2-18 Price-earnings ratio [LO2]
Botox Facial Care had earnings after taxes of $280,000 in 2009 with200,000 shares of stock outstanding. The stock price was $30.80. In2010, earnings after taxes increased to $320,000 with the same200,000 shares outstanding. The stock price was $40.00. |
(a) | Compute earnings per share and the P/E ratio for 2009. The P/Eratio equals the stock price divided by earnings per share.(Enter only numeric values. Round intermediate calculations and EPSanswer to 2 decimal places. Omit the "$" sign in yourresponse.) |
2009 | |||
Earnings per share | $ | ||
P/E ratio | |||
(b) | Compute earnings per share and the P/E ratio for 2010. (Enter only numericvalues. Round intermediatecalculations and EPS answer to 2decimal places. Omit the "$" sign in your response.) |
2010 | |||
Earnings per share | $ | ||
P/E ratio | |||
(c) | Give a general explanation of why the P/E ratio changed. (Round yourintermediate calculations and final answers to 2 decimalplaces. Omit the "%" sign inyour response.) |
The stock price (Click to select)decreasedincreased by% while EPS only (Click to select)decreasedincreased %. |
Problem 2-17 Earnings per share and retained earnings [LO1, 3]
Quantum Technology had $640,000 of retained earnings on December31, 2010. The company paid common dividends of $30,000 in 2010 andhad retained earnings of $500,000 on December 31, 2009. |
(a) | How much did Quantum Technology earn during 2010? (Omit the "$" sign in your response.) |
Earnings available to common stockholders | $ |
(b) | What would earnings per share be if 40,000 shares of common stockwere outstanding? (Roundyour answer to 2 decimal places. Omit the "$" sign in your response.) |
Earnings per share | $ |