Chapter 17, Problem E17.23E

To determine

Concept Introduction

Earnings per Share: Earnings per Share (EPS) is a financial profitability ratio that measures the amount of net income available to common stockholders earned on one share. It is calculated by dividing net income available to common stockholders by the average (or weighted average) number of shares outstanding during a particular period.

Price Earnings Ratio: Price Earnings Ratio is a financial ratio for valuing a company’s stock in the market that shows what the investors are willing to pay for $1 of the company’s earnings. It is measured as a ratio of market price per share of a company’s stock to the earnings per share for a particular period.

Dividend Yield: Dividend Yield is a financial ratio that shows what percentage of a stock’s market price is paid to the stockholders in the form of dividends by a company. It is measured as a ratio of dividend per share to the market price per share for a particular period.

Dividend Payout Ratio: Dividend Payout Ratio is a financial ratio that shows the percentage of a company’s earnings that is paid in the form of dividends. It is calculated by dividing dividend per share by earnings per share (EPS) for a particular period.

To Evaluate: The common stock of Regal State Bank as an investment by using the three stock ratios to determine whether the common stock has increased or decreased in attractiveness during the past year.