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25 December, 03:58

Jupiter Explorers has $7,800 in sales. The profit margin is 4 percent. There are 6,100 shares of stock outstanding, with a price of $1.80 per share. What is the company's price-earnings ratio?

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  1. 25 December, 04:32
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    The company's price-earnings ratio is 36.

    Explanation:

    Price earning ratio is the ratio of market value of share to earning per share. It shows that how much investors are willing to pay for each dollar of earning of the company.

    Profit margin = Net income / sales

    0.04 = Net Income / $7800

    Net Income = $7800 x 0.04 = $312

    Earning Per share = Net Income / number of outstanding shares

    Earning Per share = $312 / 6,100 = $0.05

    Price earning ratio = Market price of share / Earning per share

    Price earning ratio = $1.8 / $0.05 = 36
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Home » Business » Jupiter Explorers has $7,800 in sales. The profit margin is 4 percent. There are 6,100 shares of stock outstanding, with a price of $1.80 per share. What is the company's price-earnings ratio?
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