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Problem #3 (P/E and EPS): Tom's management team is very concerned about its company's price earnings ratio and carings per share. 1. Calculate the earnings per share and the P/E ratio for Tom's. 2. Assume that Whole Food's EPS is $2.25 per share and the P/E ratio is 10x. Compare Tom's ratios to Whole Food's. What conclusions can you draw? Income Statement (Millions of $) Balance Sheet (Millions of $) Assets Cash and securities Accounts receivable Inventories 2019 $2,145.00 $8,970.09 $12,480.00 Total current assets Net sales Operating costs except depreciation Depreciation Earnings before interest and taxes (EBIT) Less interest Earnings before taxes (EBT) Taxes Net income $23,595.00 $15,405.00 $39,000.00 2019 $58,500.00 $54,698.00 $1,025.00 $2,779.00 $829.00 $1,950.00 $682.00 $1,268.00 Net plant and equipment Total assets Liabilities and Equity Accounts payable Accruals Notes payable Total current liabilities Long-term bonds Total liabilities Common stock Retained camnings Total common equity Total liabilities and equity $7,410.00 $4,290.00 $5,460.00 $17,160.00 $7,800.00 $24,960.00 $5,460.00 $8,580.00 $14,0-10.00 $39,000.00 Other data: Shares outstanding (millions) Common dividends millions of 5) Intrate on notes payable & L-T bonds Federal plus state income tax rate Year-end stock price 500 $143.63 6.25% 35% $30.42

Answer 1

Ans (1) EPS (earning per senare ) = Net Income total share outstanding 1268 500 PRE Ratio = = 2.536 7 2.54 Market Price pershaure Earning per Share 30.42 2.54 = 11.98 = 12 EPS P/E Ratio Tom 2.536 11.98 Whole food's 2.25 10 from the analysis we con say that Tom is performing to well as EPS of Tom is more than whole food higher the EPS brigher aon morre profitable is the organisation. P/E ratio relates company share price to its ERS higher P/E ratio could mean that a compony's stocks is over valued on else that investour are expecting higher growth rate in future and some Tom has high EPS we can say that investour are expecting higher growth Rati in future w. this is why Tom has higher PIERatio then whole food food's