The following comparative net income and earnings per share data are provided for

Krispy Kreme Doughnuts, Inc., for three recent fiscal years:

The stock market prices at the end of each of the three fiscal years were as follows:
Feb. 2, 2003 ........$30.41
Feb. 3, 2002 ........ 37.40
Jan. 28, 2001 ....... 16.75
a. Determine the price-earnings ratio for Krispy Kreme Doughnuts, Inc. for each of the three fiscal years, using basic earnings per share and the ending stock market price.
b. What conclusions can you reach by considering the price-earnings ratio?
c. Why is the diluted earnings per share less than the basic earnings pershare?

Transcribed Image Text:

Year Ended Net income Basic earnings per share Diluted earnings per share Jan. 28, 2001 Feb. 3, 2002 Feb. 2, 2003 $14,725 0.30 0.27 526,378 0.49 0.45 $33,478 0.61 0.56