Earnings per Share: It is a mandatory term to be reported with the financials of a company in the annual report. It reflects the amount earned or lost on each outstanding common equity share. It is widely used to evaluate the performance of a business.
Price/Earnings Ratio: It depicts the relation of market price of a share to earnings per share of that company. The price/earnings ratio shows the market value of the amount invested to earn $1 by a company. It is a major tool to be used by investors before the decisions related to investments in a company.
1.
To Compute: The earnings per share of company A for 2018.
2.
To Compute: The price/earnings ratio of company A for 2018.
3.
To Analyze: Earnings per share and price/earnings ratio for 2018.
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Horngren's Accounting, Student Value Edition (12th Edition)
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