Question

You are considering an investment in roxies bed and breakfast corp during the last year the firms income statement listed an addition to reatian of?

Answer 1

Market value ratios indicate how the common stock of a company is assessed in the capital market. The important market value ratios are Book value per share, earnings per share, market-to-book ratio, price-earnings ratio, and dividend yield.

Market Value Ratios

Book value per share = Common Equity/No of shares outstanding

= $46m / 20m

= $2.30

Earnings per share = Net Income/No of shares outstanding { where net income = retained earnings + dividends = 10.80 + 3.20 = $14m}

=$14m / 20m

= $0.7 per share

Market-to-book ratio = Market value per share/Book value per share

= $8.90 / $2.30

=3.87 times

Price-earnings ratio = Market price per share/Earnings per share

$8.90 / $0.7

=12.71 times.

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