A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of $126,400, a price-earnings ratio of 18.7, and a book value per share of $7.92. What is the market-to-book ratio

The market-to-book ratio is 1.87

Step-by-step explanation:

From the data provided we have;

Number of shares of stock outstanding = 160,000

sales = $1.94million

net income = $126,400

price earnings ratio = 18.7

book value per share = $7.92

To determine the market-to-book ratio, we solve;

earnings per share = net income ÷  number of shares of stock outstanding

= $126400 ÷ 160000

= $0.79

price per share = earnings per share ÷ price earnings ratio

= 0.79 x 18.7

= $14.773

market-to-book ratio = price per share ÷ book value per share

= $14.773 ÷ $7.92

market-to-book ratio = 1.87

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