A Company Has Net Income of $850,000

question 173

Multiple Choice

A company has net income of $850,000.It also has 125,000 weighted-average common shares outstanding and a market value per share of $115.The company's price-earnings ratio is equal to:

• A)16.9
• B)14.7
• C)92.0
• D)13.5
• E)8.0

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Definitions:

Income Summary

An account used in the closing process that summarizes the revenues and expenses of an accounting period, to determine the net income or loss.

Ratio Based

A method or analysis that involves the comparison of two or more numbers to evaluate the performance, condition, or relationship of different financial aspects of a business.

Net Income

The net income of a business following the subtraction of all costs and taxes from its total revenue.

Capital Balances

This represents the amount of funds that shareholders have invested in a company, often reflected in the equity section of a balance sheet.