Problem 2-18 Price-earnings ratio [LO2]

Botox Facial Care had earnings after taxes of $280,000 in 2009 with 200,000 shares of stock outstanding. The stock price was $30.80. In 2010, earnings after taxes increased to $320,000 with the same 200,000 shares outstanding. The stock price was $40.00.

(a)	Compute earnings per share and the P/E ratio for 2009. The P/E ratio equals the stock price divided by earnings per share. (Enter only numeric values. Round intermediate calculations and EPS answer to 2 decimal places. Omit the "$" sign in your response.)

	2009
Earnings per share	$
P/E ratio

(b)	Compute earnings per share and the P/E ratio for 2010. (Enter only numeric values. Round intermediate calculations and EPS answer to 2 decimal places. Omit the "$" sign in your response.)

	2010
Earnings per share	$
P/E ratio

(c)	Give a general explanation of why the P/E ratio changed. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

The stock price (Click to select) decreased increased by % while EPS only (Click to select) decreased increased %.

Problem 2-17 Earnings per share and retained earnings [LO1, 3]

Quantum Technology had $640,000 of retained earnings on December 31, 2010. The company paid common dividends of $30,000 in 2010 and had retained earnings of $500,000 on December 31, 2009.

(a)	How much did Quantum Technology earn during 2010? (Omit the "$" sign in your response.)

Earnings available to common stockholders

$

(b)	What would earnings per share be if 40,000 shares of common stock were outstanding? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Earnings per share

$