The Financial Statements of Midwest Tours Are Given Below

question 82

Multiple Choice

The financial statements of Midwest Tours are given below.
$\begin{array}{c}Midwest ~Tours \\\text { Income Statement (2009) }\\\begin{array}{lrr} \hline \text { Sales } & \$ 2,500,000 \\\text { Cost of goods sold } & \underline {1,260,000} \\\text { Gross profit } & 1,240,000 \\\text { Selling \& administrative expenses } & \underline { 700,000} \\\text { Operating profit } & 540,000 \\\text { Interest expense } & \underline {160,000 }\\\text { Income before tax } & 380,000 \\\text { Tax expense } & \underline {152,000} \\ \text { Net income } & \underline {\$ 228,000} \\\end{array} \end{array}$
$\begin{array}{c}\begin{array}{lll} \text { Balance Sheet } &2009\\\\ \text { Cash } &\$ 60,000 \\ \text { Accounts receivable } & 500,000 \\ \text { Inventory } & \underline {300,000} \\ \text {Total current assets } &\$ 860,000 \\ \text {Fixed assets } & \underline {2,180,000} \\ \text { Total assets } & \underline {\$ 3,040,000} \\\\ \text { Accounts Payable } &\$ 200,000 \\ \text { Bank loan } & \underline {460,000} \\ \text { Total current liabilities } & \$ 660,000 \\ \text {Bond payable } & \underline { 860,000} \\ \text { Total liabilities } & \underline {\$ 1,520,000 }\\ \text { Common stock ( 130,000 shares) } & \$ 120,000 \\ \text {Retained earnings } & \underline {1,400,000}\\ \text { Total liabilities \& equity } & \underline {\$ 3,040,000} \\\end{array}\begin{array}{lll}2008\\\\\$50,000 \\450,000 \\\underline { 270,000} \\\$ 770,000 \\\underline { 2,000,000} \\\underline { \$ 2,770,000} \\\\\$170,000 \\\underline { 440,000} \\\$ 610,000 \\\underline { 860,000} \\\$ 1,470,000 \\\$ 120,000 \\\underline { 1,300,000 }\\\underline { \$ 2,890,000} \\\end{array}\end{array}$
Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's P/E ratio for 2009 is

• A) 4.74.
• B) 6.63.
• C) 5.21.
• D) 5.00.

---

Definitions:

Memory

The faculty by which the mind stores and remembers information.

Acquisition

The process where one company purchases most or all of another company's shares to gain control of that company.

Retrieval

The process of accessing and bringing into consciousness information stored in memory.

Chunking

A method of organizing information into smaller, manageable units or chunks, making it easier to remember or process.