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Business Accounting Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (5th Edition)

1) 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: Earnings per share = Net income – Preferred dividends 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: Price/earnings ratio = Market price per share of common stock Earnings per share To compute: Earnings per share and price/earnings ratio. Given info: Income statement and Balance sheet Answer: Compute earnings per share. Earnings per share = Net income – Preferred dividends Weighted average number of common shares outstanding = $ 29 , 000 , 000 − $ 0 100 , 000 shares = $ 29.0 Explanation: Earnings per share is determined by dividing net income and weighted average number of common shares outstanding. Thus, the earnings per share of Company S are $29.0 per share. 2) Answer: Compute price/earnings ratio: Price/earnings ratio= Market price per share of common stock Earnings per share = $ 65.50 $ 29.00 = 2.26 Price/earnings ratio = 2.26 Explanation: Price/earnings ratio is determined by dividing market price per share of common stock and earnings per share. Therefore, the price/earnings ratio is 2.26. 3) To determine: Evaluate profitability. Explanation: Evaluation of profitability: The price per earnings ratio for 2015 is 2.26. It is very low. Company S is selling its stock at 2.26 times of one year’s earnings and this is also very low. Therefore, when earnings per share is high, there will be better opportunity towards making investment.

1) 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: Earnings per share = Net income – Preferred dividends 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: Price/earnings ratio = Market price per share of common stock Earnings per share To compute: Earnings per share and price/earnings ratio. Given info: Income statement and Balance sheet Answer: Compute earnings per share. Earnings per share = Net income – Preferred dividends Weighted average number of common shares outstanding = $ 29 , 000 , 000 − $ 0 100 , 000 shares = $ 29.0 Explanation: Earnings per share is determined by dividing net income and weighted average number of common shares outstanding. Thus, the earnings per share of Company S are $29.0 per share. 2) Answer: Compute price/earnings ratio: Price/earnings ratio= Market price per share of common stock Earnings per share = $ 65.50 $ 29.00 = 2.26 Price/earnings ratio = 2.26 Explanation: Price/earnings ratio is determined by dividing market price per share of common stock and earnings per share. Therefore, the price/earnings ratio is 2.26. 3) To determine: Evaluate profitability. Explanation: Evaluation of profitability: The price per earnings ratio for 2015 is 2.26. It is very low. Company S is selling its stock at 2.26 times of one year’s earnings and this is also very low. Therefore, when earnings per share is high, there will be better opportunity towards making investment.

Solution Summary: The author explains how earnings per share are determined by dividing net income and weighted average number of common shares outstanding.

Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (5th Edition)

Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (5th Edition)

5th Edition

ISBN: 9780134078922

Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura

Publisher: PEARSON

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Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (5th Edition)

Ch. 15 - What part of the Libertys annual report is written...Ch. 15 - Horizontal analysis of Liberty's balance sheet for...Ch. 15 - Vertical analysis of Liberty's balance sheet for...Ch. 15 - Which statement best describes Liberty's acid-test...Ch. 15 - Liberty's inventory turnover during 2017 was...Ch. 15 - Prob. 6QC Ch. 15 - Prob. 7QC Ch. 15 - Liberty's rate of return on common stockholders'...Ch. 15 - The company has 2,500 shares of common stock...Ch. 15 - Prob. 10AQC

Ch. 15 - What ate the three main ways to analyze financial...Ch. 15 - What is an annual report? Briefly describe the key...Ch. 15 - Prob. 3RQ Ch. 15 - What is trend analysis, and how does it differ...Ch. 15 - Prob. 5RQ Ch. 15 - Prob. 6RQ Ch. 15 - Prob. 7RQ Ch. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Prob. 9RQ Ch. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Prob. 12RQ Ch. 15 - Prob. 13RQ Ch. 15 - Prob. 14RQ Ch. 15 - Prob. 15RQ Ch. 15 - Prob. 15.1SE Ch. 15 - Performing horizontal analysis McDonald Corp....Ch. 15 - Calculating trend analysis Variline Corp. reported...Ch. 15 - Performing vertical analysis Hoosier Optical...Ch. 15 - Preparing common-size income statement Data for...Ch. 15 - Shine's Companies, a home improvement store chain,...Ch. 15 - Shine's Companies, a home improvement store chain,...Ch. 15 - Shine's Companies, a home improvement store chain,...Ch. 15 - Prob. 15.9SE Ch. 15 - Prob. 15.10SE Ch. 15 - Prob. 15.11SE Ch. 15 - Using ratios to reconstruct a balance sheet...Ch. 15 - Prob. 15.13SE Ch. 15 - Prob. 15.14SE Ch. 15 - Prob. 15.15E Ch. 15 - Computing trend analysis Grand Oaks Realty's net...Ch. 15 - Prob. 15.17E Ch. 15 - Prob. 15.18E Ch. 15 - Prob. 15.19E Ch. 15 - Prob. 15.20E Ch. 15 - Analyzing the ability to pay liabilities Big Bend...Ch. 15 - Analyzing profitability Varsity, Inc.s comparative...Ch. 15 - Prob. 15.23E Ch. 15 - Using ratios to reconstruct a balance sheet The...Ch. 15 - Prob. 15.25E Ch. 15 - Computing earnings per share Falconi Academy...Ch. 15 - Prob. 15.27AP Ch. 15 - Prob. 15.28AP Ch. 15 - Prob. 15.29AP Ch. 15 - Prob. 15.30AP Ch. 15 - Using ratios to evaluate a stock investment...Ch. 15 - Prob. 15.32AP Ch. 15 - Preparing an income statement The following...Ch. 15 - Computing trend analysis and return on common...Ch. 15 - Prob. 15.35BP Ch. 15 - Prob. 15.36BP Ch. 15 - Determining the effects of business transactions...Ch. 15 - Prob. 15.38BP Ch. 15 - Prob. 15.39BP Ch. 15 - Prob. 15.40BP Ch. 15 - Prob. 15.41CP Ch. 15 - Lance Berkman is the controller of Saturn, a dance...Ch. 15 - Prob. 15.1CTEI

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