As a shareholder of an oil company, you receive its annual report. In the financial statements, the

Question:

As a shareholder of an oil company, you receive its annual report. In the financial statements, the firm has reported assets of $9 million, liabilities of $5 million, after-tax earnings of $2 million, and 750,000 outstanding shares of common stock.

a. Calculate the earnings per share of this oil company's common stock.

b. Assuming that a share of this oil company's common stock has a market value of $40, what is the firm's price-earnings ratio?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...