Assume the following information about a publicly traded automobile manufacturer:
Revenue: $16,000,000 -
Cash flow: $1,700,000 -
Net worth per share: $14.55 -
Current stock price: $30.25 per share
Number of common shares outstanding: 1,300,000
Using this information, what are the price-to-sales, price-to-book, and price-to-cash flow ratios, respectively?
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A. B. C. D. E. F.E
To calculate the price-to-sales ratio, divide the market price of a common stock by its sales-per share figure. The equation for the price-to-sales ratio is as follows:
Price-to-sales ratio = [P0 / sales per share].
Incorporating the given information into this equation will yield the following:
Price-to-sales ratio = [$30.25 / ($16,000,000 / 1,300,000)] = 2.4578
The calculation of the price-to-book ratio involves dividing the market price of a common stock by its net worth per share. The equation for the price-to-book ratio is as follows:
Price-to-book ratio = [P0 / net worth per share].
Where: net worth per share = (total assets - total liabilities) / # of common shares outstanding.
In this example, the net worth figure has been converted to a per-share basis, and the calculation of the price-to-book ratio is straightforward:
Price-to-book ratio = ($30.35 / $14.55) = 2.0859
The calculation of the price-to-cash flow ratio involves dividing the market price of a common stock by the cash-flow-per-share figure. The calculation of the price- to-cash flow ratio is as follows:
Price-to-cash flow = (P0 / cash flow per share)
Incorporating the given information into this equation will yield the following:
Price-to-cash flow = [$30.35 / (1,700,000 / 1,300,000)] = 23.132