Question

Succeed's Companies, a home improvement store chain, reported the following summarized figures:

Succeed's Companies, a home improvement store chain, reported the following summarized figures 囲(Click the icon to view the income statement.) 囲(Click the icon to view the balance sheets.) Succeed's has 20,000 common shares outstanding during 2018 Read the requirements. Requirement 1. Compute earnings per share (EPS) for 2018 for Begin by selecting the formula to calculate Succeed's Companies' EPS. Then enter the amounts and calculate the EPS for 2018. (Abbreviation used: Weighted avg number of CSO weighted average number of common shares outstanding, market price per share of CS-market price per share of common stock. Complete all input boxes. Enter a "O" for balance with a zero value. Round your answer to the nearest cent, SX.Xx) )I EPS

Answer 1

(1): EPS = (Net income – preferred dividends)/weighted average shares outstanding

= (16400-0)/20000

= $0.82

(2): P/E ratio = price per share/earnings per share

= 14.5/0.82

= $17.68

(3): EPS helps in determining a company’s profitability on a per share basis. On the other hand P/E ratio is not profitability metric, rather it is used to determine the value of a company in the market compared to its competition.