Knife Corp ​
-Refer to the Data for Knife Corp

question 6

Essay

Knife Corp.
Use the selected data presented below from the financial statements of Knife Corp.for 2018 and 2017 to answer the questions that follow.
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$\begin{array}{lrr}&2018&2017\\\text { Net income } & \$ 110,000 & \$ 123,000 \\\text { Cash dividends paid on preferred stock } & \$ 12,000 & \$ 15,000 \\\text { Cash dividends paid on common stock } & \$ 42,000 & \$ 38,000 \\\text { Weighted average number of common shares outstanding } & 105,000 & \$ 5,000 \\\text { Market price per share of common stock at the end of the year } & \$ 16.00 & \$ 13.00\end{array}$ ​
-Refer to the data for Knife Corp.
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Required
(A)Calculate earnings per share for 2018 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?
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(B)Calculate the price/earnings ratio for 2018 for Knife.Why is this ratio important to investors? Explain.

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Definitions:

Restriction Of Range

A problem when scores on a variable are limited to a small subset of their possible values; this makes it more difficult to identify relationships of the variable to other variables of interest.

Correlation Coefficients

Numerical measures indicating the strength and direction of a linear relationship between two quantifiable variables.

Sample

A subset of a population selected for measurement, observation, or questioning to provide statistical information about the population.

Regression Equation

A mathematical formula used to predict the value of a dependent variable based on one or more independent variables.