[janemorales]

Accounts Payable $ 1,800
Accounts Receivable 5,475
Building 40,000
Cash 1,125
Capital Stock 20,000
Inventory 3,400
Land 10,000
Long-Term Notes Payable 27,000
Market Value of Equity 90,000
Net Income 7,000
Retained Earnings (ending) 5,000
Sales 100,000
Short-Term Notes Payable 2,300
Stockholders' Equity 25,000
Unearned Revenue 3,900

Use the information in the table above to compute the following ratios:
a. Debt Ratio L/A – 31,100/60,000=51%
b. Current Ratio CA/CL – 60,000/4100=14.63%
c. Return on Sales NI/Sales – 7000/100,000=7%
d. Asset Turnover Sales/FA – 100,000/54,525=1.83%
e. Return on Equity NI/Stockholders’ Equity – 7000/25,000=28%
f. Price-Earnings Ratio Market price per share/earnings per share -

Did I compute these ratios correctly? Please help me with P/E ratio - I am at a total loss

[morgaine300]

I'm going to shoot whoever thought it would be fun to list accounts in problems alphabetically! No one has to deal with this in real life.

Sorry about the rant. :-)

a. You didn't include unearned revenues, which is a liability representing an obligation to do work which has already been paid for.
b. Ditto
d. Where did you get the 54,525? You have 50,000 in fixed assets.

e. OK. First, you have to do the EPS. That is earnings/common shares. You have your earnings. I don't know what the number of common shares is because that information isn't here.

Ooooh... that's what the market value of equity is supposed to be. What a weird way to do this. OK, I guess they want you to work in totals and not per share amounts. But the equation is actually per share. You don't really need to do earnings per share.

Market price/earnings means the same thing as market price per share/earnings per share, if you use totals instead of per share amounts. You have less math to do, but they actually made this more complicated because the equation given is per share.

If you have 90,000 shares, the market value per share would be $1. And the earnings per share would be (7000/90,000) .07777. So market per share/earnings per share would be $1/.07777.

Well, instead you can do it with the totals, because the relationship between the two is the same: market of 90,000/earnings of 7000.