Chapter 15, Problem 15.10SE

Requirement 1:

To determine

Earnings per share: Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock.

Formula: $\text{Earnings}\text{per}\text{share = }\frac{\text{Net}\text{income – Preferred}\text{dividends}}{\text{Weighted average number of common shares outstanding}}$

Price / earnings ratio: Price/earnings ratio are used to determine the profitability of a company. This ratio is abbreviated as P/E.

Formula: $\text{Price/earnings ratio}=\frac{\text{Market price per share of common stock}}{\text{Earnings per share}}$

To compute:  Earnings per share and price/earnings ratio.

Requirement 2:

To determine

To Compute:  price/earnings ratio:

Requirement 3:

To determine

To Evaluate: profitability: