Lake Inc. and River Inc. reported net incomes of $800,000 and $1,000,000, respectively, for the most recent

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Lake Inc. and River Inc. reported net incomes of $800,000 and $1,000,000, respectively, for the most recent fiscal year. Both companies had 200,000 shares of common stock issued and outstanding. The market price per share of Lake’s stock was $50, while River’s sold for $85 per share.


Required
a. Determine the P/E ratio for each company.
b. Based on the P/E ratios computed in Requirement a, which company do investors believe has the greater potential for growth in income?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Related Book For  book-img-for-question

Introductory Financial Accounting for Business

ISBN: 978-1260299441

1st edition

Authors: Thomas Edmonds, Christopher Edmonds

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