The Following Amounts Were Taken from the Financial Statements of Ando

question 103

Multiple Choice

The following amounts were taken from the financial statements of Ando Company: $\begin{array}{lrr}&2014&2013\\\text { Total assets } & \$ 800,000 & \$ 1,000,000 \\\text { Net sales } & 720,000 & 650,000 \\\text { Gross profit } & 352,000 & 320,000 \\\text { Net income } & 144,000 & 11,000 \\\text { Weighted average number of } & &\\\text { common shares outstanding }&90,000 & 90,000 \\\text { Market price of common stock }&\$ 48 & \$ 39\end{array}$ The price-earnings ratio for 2014 is

• A) 30 times.
• B) 25 times.
• C) 48 times.
• D) 3 times.

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Definitions:

Present Value

The equivalent value today of cash flows or a sum of money anticipated in the future, using a predetermined return rate.

Annuity

A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.

Interest Rate

Interest rate is the percentage charged by a lender to a borrower for the use of assets, adjusting for the cost of credit or the return on investment.

Lump Sum

A single payment made at a particular time, as opposed to several smaller installments.