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LESSON 15-2. Analyzing an Income Statement. TERMS REVIEW. page 460. financial ratio – comparison between two items of financial information earnings per share – amount of net income after federal income tax belonging to a single share of stock

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lesson 15 2

LESSON 15-2

Analyzing an Income Statement

terms review
TERMS REVIEW

page 460

  • financial ratio – comparison between two items of financial information
  • earnings per share – amount of net income after federal income tax belonging to a single share of stock

Net Income after Fed. Income tax/Number of Shares Outs.

80,313.95 / 2500 = 32.13 Earnings per share

  • price-earning ratio – Relationship between market value per share and earnings per share of stock

Market Price per share/Earnings per share

345/32.13 = 10.7 Price-Earnings Ratio

LESSON 15-2

financial ratios

Market Priceper Share

Net Incomeafter FederalIncome Tax

÷

÷

Earnings perShare

Number of SharesOutstanding

=

=

Price-EarningsRatio

Earningsper Share

FINANCIAL RATIOS

page 459

Earnings per Share

$80,313.95

÷

2,500

=

$32.13

Price-Earnings Ratio

$345.00

÷

$32.13

=

10.7

LESSON 15-2