Market Value Ratios Lab R Doors' Year-End Price on Its

question 113

Multiple Choice

Market Value Ratios Lab R Doors' year-end price on its common stock is $40. The firm has a profit margin of 10%, total assets of $30 million, a total asset turnover ratio of 2, no preferred stock, and there are 4 million shares of common stock outstanding. What is the PE ratio for Lab R Doors?

• A) 0.375
• B) 0.750
• C) 6.667
• D) 26.667

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Definitions:

Potential Output

The highest level of real GDP that an economy can achieve when it is operating at full capacity, without causing inflation.

Recessionary Gap

A situation where an economy's real GDP is lower than its potential GDP, leading to underutilized resources and higher unemployment.

Potential Output

The maximum amount of goods and services an economy can produce when it is using all of its resources efficiently.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable, often due to market failure or intervention.