Compute (1) the price-earnings ratio and (2) the book-to-market ratio for Companies M and N. Indicate which of the two companies is more likely to be in a high-growth industry.
.............................................................Company M............... Company N
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . $5,000................... $65,000
Stock price per share . . . . . . . . . . . . . . . . . . . .... . . . . . . $64.00..................... $35.00
Weighted shares outstanding . . . . . . . . . . . . . . ..... . . . . . . . 625................... 125,000
Total stockholders' equity . . . . . . . . . . . . . . . . .. . . . . . . $56,000.................. $600,000