Question

Blossom Company had net income of $2688000 and paid dividends to common stockholders of $314000 in 2022. The weighted average number of shares outstanding in 2022 was 448000 shares. Blossom Company common stock is selling for $72 per share on the NASDAQ. Blossom Company price-earnings ratio is

A. 12 times

B. 14 times

c. 6 times

d. 24 times

Answer 1

Correct answer is ( a.)12 times

Explanation:

Price Earning Ratio = Market price per share / Earning per share

Earning per share = ( Net Income - Preference dividend ) / Number of shares outstanding

EPS = ( $ 2,688,000 - 0 ) / 448,000 shares

= $6

Price Earning Ratio = $72 / $6

= 12 times

Thank you!