Knife Corp.

Use the selected data presented below from the financial statements of Knife Corp. for 2017 and 2016 to answer the questions that follow. 2017 2016 Net income $110,000 $123,000 Cash dividends paid on preferred stock $12,000 $15,000 Cash dividends paid on common stock $42,000 $38,000 Weighted average number of common shares outstanding 105,000 95,000 Market price per share of common stock at the end of the year $16.00 $13.00 17. Refer to the data for Knife Corp. REQUIRED:

(A) Calculate earnings per share for 2017 for Knife. Why is this considered one of the most quoted ratios for public companies? Which investors, common or preferred or both, desire this information? (B) Calculate the price/earnings ratio for 2017 for Knife. Why is this ratio important to investors? Explain.