Market Value Ratios

Per-share measures

The price-earnings ratio

Market value versus book value

Connecting to valuation

A firm reports net income of 480,000 dollars and a weighted average of 128,000 shares outstanding. What is earnings per share?

A firm has total equity of 100,000 dollars, preferred equity of 20,000 dollars, and 8,000 common shares outstanding. What is book value per share?

A stock trades at 69.41 dollars with earnings per share of 3.75 dollars. What does the resulting price-earnings ratio of about 18.5 tell an investor?

Why do analysts compute the price-earnings ratio on both trailing and forward earnings?

Why do most successful firms trade at market-to-book ratios above 1?

In which comparison is the market-to-book ratio least informative?

What three-letter abbreviation names the ratio of market price per share to earnings per share? Write the abbreviation.

What two-word term names the class of shareholders whose per-share figures exclude preferred equity? Answer in lowercase.

What three-word term names common equity divided by shares outstanding? Answer in lowercase.

What three-letter abbreviation qualifies a price-earnings ratio computed on the last twelve months of actual earnings? Write the abbreviation.