Jupiter Explorers has $7,800 in sales. The profit margin is 4 percent. There are 6,100 shares of stock outstanding, with a price

Question

Kipish [7]

2 years ago

5

Jupiter Explorers has $7,800 in sales. The profit margin is 4 percent. There are 6,100 shares of stock outstanding, with a price

of $1.80 per share. What is the company's price–earnings ratio?

Business

1 answer:

Law Incorporation [45] · Answer 1 · 2022-03-19T21:25:01+03:00

Answer:

The company's price–earnings ratio is 36.

Explanation:

Price earning ratio is the ratio of market value of share to earning per share. It shows that how much investors are willing to pay for each dollar of earning of the company.

Profit margin = Net income / sales

0.04 = Net Income / $7800

Net Income = $7800 x 0.04 = $312

Earning Per share = Net Income / number of outstanding shares

Earning Per share = $312 / 6,100 = $0.05

Price earning ratio = Market price of share / Earning per share

Price earning ratio = $1.8 / $0.05 = 36