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25 Jan 2024, 02:00
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Difficulty:
35%
(medium)
Question Stats:
72% (01:31) correct
28%
(01:46)
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A company's price to earnings ratio is the price of 1 share of that company's stock divided by that company's most recent annual earnings per share of stock. Using the information in the table above, by what percent did Alpha Company's price to earnings ratio change from the end of 2005 to the end of 2006 ?
A. -100%
B. -50%
C. -10%
D. 50%
E. 100%
Attachment:
2024-01-25_12-42-51.png [ 52.25 KiB | Viewed 5650 times ]
Attachment:
2024-01-25_12-49-32.png [ 52.11 KiB | Viewed 7586 times ]
25 Jan 2024, 02:03
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guddo
A company's price to earnings ratio is the price of 1 share of that company's stock divided by that company's most recent annual earnings per share of stock. Using the information in the table above, by what percent did Alpha Company's price to earnings ratio change from the end of 2005 to the end of 2006 ?
A. -100%
B. -50%
C. -10%
D. 50%
E. 100%
Attachment:
2024-01-25_12-42-51.png
Attachment:
2024-01-25_12-49-32.png
The price to earnings ratio at the end of 2005 was $24/1.2 = $20.
The price to earnings ratio at the end of 2006 was $24/2.4 = $10.
The change from $20 to $10 constitutes a 50% decrease in the ratio.
Answer: B.
27 Jan 2024, 12:14
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guddo
A company's price to earnings ratio is the price of 1 share of that company's stock divided by that company's most recent annual earnings per share of stock. Using the information in the table above, by what percent did Alpha Company's price to earnings ratio change from the end of 2005 to the end of 2006 ?
A. -100%
B. -50%
C. -10%
D. 50%
E. 100%
Attachment:
2024-01-25_12-42-51.png
Attachment:
2024-01-25_12-49-32.png
Price to earnings ratio = \(\frac{\text{Price of 1 share}}{\text{Most recent annual earnings per share of stock}}\)
End of 2005
- Stock Price per share = $24
- Annual Earnings per share of stock = $1.2
Price to earnings ratio = \(\frac{24}{1.2} = 20\)
End of 2006
- Stock Price per share = $24
- Annual Earnings per share of stock = $2.4
Price to earnings ratio = \(\frac{24}{2.4} = 10\)
Change %= \(\frac{\text{Final - Initial} }{\text{Initial} } * 100\)
Change %= \(\frac{10 - 20 }{20} * 100 = -50%\)
