1. Jupiter Explorers has $9,800 in sales. The profit margin is 5 percent. There
ID: 2740830 • Letter: 1
Question
1. Jupiter Explorers has $9,800 in sales. The profit margin is 5 percent. There are 4,500 shares of stock outstanding. The market price per share is $1.90. What is the price-earnings ratio?
2. A firm has a return on equity of 18 percent. The total asset turnover is 1.7 and the profit margin is 6 percent. The total equity is $7,200. What is the amount of the net income?
2. A firm has a return on equity of 18 percent. The total asset turnover is 1.7 and the profit margin is 6 percent. The total equity is $7,200. What is the amount of the net income?
Explanation / Answer
1)
Profit = Sales x profit Margin
=$9,800 x 5%
=$490
EPS= Profit after tax/ No of shares outstanding
=$490/4,500
= $ 0.10889
P/E Ratio= Market Price Per share/ EPS
=$1.9/= $ 0.10889
=$17.45
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2)Net income=Total Equity x Return on Equity
=7,200 x 18%
=$1,296
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