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    Ratio

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    Assume the following financial data:

    Short-term assets . . . . . . . . . . . . . . . . . . . . . $200,000
    Long-term assets . . . . . . . . . . . . . . . . . . . . . . 350,000
    Total assets . . . . . . . . . . . . . . . . . . . . . . . $550,000
    Short-term debt . . . . . . . . . . . . . . . . . . . . . . . $100,000
    Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 50,000
    Total liabilities . . . . . . . . . . . . . . . . . . . . . . 150,000
    Common stock . . . . . . . . . . . . . . . . . . . . . . . 150,000
    Retained earnings . . . . . . . . . . . . . . . . . . . . . 250,000
    Total liabilities and stockholders' equity . . . . $550,000
    Total earnings (after-tax) . . . . . . . . . . . . . . . . $ 48,000
    Dividends per share . . . . . . . . . . . . . . . . . . . . $ 1.10
    Stock price . . . . . . . . . . . . . . . . . . . . . . . . $ 54
    Shares outstanding . . . . . . . . . . . . . . . . . . . . . 16,000

    a. Compute the P/E ratio (stock price to earnings per share).
    b. Compute the ratio of stock price to book value per share (note that
    book value equals stockholders' equity).
    c. Compute the dividend yield.
    d. Compute the payout ratio.

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    https://brainmass.com/business/debt-ratio/87811

    Solution Preview

    a. Compute the P/E ratio (stock price to earnings per share).

    P/E is given as Market price /Earnings per Share (EPS)
    EPS = Net Income/No. of Share
    EPS = 48,000/16,000 = $3
    Market price = 54
    P/E = 54/3

    b. Compute the ...

    Solution Summary

    The solution explains various ratio calculations.

    $2.19

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