Required information Learning Objective 11-A1: Analyze earnings per share, price-earnings ratio, and dividend yield. A company with a simple capital structure computes basic EPS by dividing net income less any preferred dividends by the weighted average number of outstanding common shares A common stock's price-earnings (PE) ratio is computed by dividing the stock's market value (price) per share by its EPS. A stock's PE is based on expectations that can prove to be better or worse than eventual performance Dividend yield is the ratio of a stock's annual cash dividends per share to its market value (price) per share Dividend yield can be compared with the yield of other companies to determine whether the stock is expected to be an income or growth stock Dividend Yield - Illustration ofne Getty Images Knowledge Check 01 The following information is available for Payton Incorporated. At the end of the year, the market price of its common stock is $550 per share Earnings per share totaled $100 and dividends per