Question

KBJ has total assets of $613,00. There are 21,000 shares of stack outstanding with a market value of $13 a share. The firm has a profit margin of 6.2 percent and a total asset turnover of 1.08. What is the price-earnings ratio?A) 6.38B) 7.99C) 6.65D) 5.12E) 7.41

Answer 1

Answer:

6.65

Explanation:

Firstly, we need to calculate company revenue as below;

Asset turnover  = Company revenue/Company Asset => Company revenue =  Company Asset x Asset turnover = 613,000 x 1.08 = 662,040.

Next, we will calulate company net income as below:

Net profit margin = Net income/Company revenue => Net income = Net profit margin x Company revenue = 6.2% x 662,040 = 41,046.48.

Finally, price-earnings ratio is calulated as below:

Price-earnings ratio = Stock price/Earning per share = 13/(41,046.48/21,000) = 6.65