Earnings per Share and Price-Earnings Ratio A company reports the following: Net income $1,306,000 Preferred dividends $74,000 Shares of common stock outstanding 80,000 Market price per share of common stock $97.02 a. Determine the company's earnings per share on common stock. Round your answer to the nearest cent. Use the rounded answer of requirement a for subsequent requirement, if required. $ b. Determine the company's price-earnings ratio. Round to one decimal place.

(a) The company's earnings per share on common stock is $ 15.40

(b) The company's price-earnings ratio is 6.3

Explanation:

Net income = $1,306,000

Preferred dividends = $74,000

Shares of common stock outstanding = 80,000 shares

Market price per share of common stock = $97.02

(a) Earnings per share = (Net income-Preference dividend) : Shares outstanding

= ($1,306,000-$74,000) : 80,000 shares

= $1,232,000 : 80,000 shares

= $ 15.4

(b) Price-Earnings ratio = Market price per share : Earnings per share

= $97.02 : $15.40 per share

= 6.3