A Company Reported Net Income of $6 Million

question 25

Multiple Choice

A company reported net income of $6 million.During the year the average number of common shares outstanding was 3 million.The price of a share of common stock at the end of the year was $5.There were 400,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative.
-Use the information above to answer the following question.The Price/Earnings ratio is approximately:

• A) 2.00.
• B) 2.50.
• C) 2.84.
• D) 12.50.

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Definitions:

Mutual Fund Assets

The total market value of all the financial assets being managed by a mutual fund.

Guaranteed Rates

Guaranteed rates are interest or return rates promised to investors or savers over a specified period, regardless of market conditions.

Low-cost Diversification

A financial strategy that involves spreading investments across various assets to reduce risk without incurring significant expenses.

Professional Management

The oversight of investment portfolios by specialists who make decisions about asset selection and allocation, aiming to achieve specific financial goals.