Required information

Exercise 10-16A Calculate and analyze ratios (LO10-8)

[The following information applies to the questions displayed below.] Financial information for Forever 18 includes the following selected data:

($ in millions except share data)	2021		2020
Net income	$	180	$	270
Dividends on preferred stock	$	33	$	24
Average shares outstanding (in millions)		225		375
Stock price	$	11.32	$	10.27

Exercise 10-16A Part 2

2-a. Calculate the price-earnings ratio in 2020 and 2021. (Enter your Price-earning ratio values to two decimal places. Enter your answers in millions (i.e. 5,550,000 should be entered as 5.55).)

2-b. In which year is the stock priced lower in relation to reported earnings?

• 2020

• 2021

Explanation

2-b. The stock is priced lower in relation to reported earnings in 2020.