Financial Statements for Laroche Company Appear Below:

Shareholders' Equity

question 117

Multiple Choice

Financial statements for Laroche Company appear below:

Shareholders' Equity:
$\begin{array}{|l|r|}\hline & \begin{array}{r}\text { Larned Company } \\\text { Income Statement }\\\text { For the Year Ended December 31, Year 2 }\\\text { (dollars in thousands) }\end{array} \\\hline \text { Sales (All on Account) } & \$ 2250 \\\hline \text { Costs of Goods Sold } & \$ 1570 \\\hline \text { Gross Margin } & \$ 680 \\\hline \text { Operating Expenses } & \$ 270 \\\hline \text { Net Operating Income } & \$ 410 \\\hline \text { Interest Expense } & \$ 30 \\\hline \text { Net Income before Taxes } & \$ 380 \\\hline \text { Income Taxes }(30 \%) & \$ 114 \\\hline \text { Net Income } & \$ 266 \\\hline\end{array}$
Total dividends during Year 2 were $\$ 166,000$ , of which $\$ 10,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 150$ .

-Laroche Company's price-earnings ratio on December 31,Year 2 was closest to which of the following?

• A) 9.47.
• B) 13.53.
• C) 14.06.
• D) 40.43.

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Definitions:

Earnings Per Share

Earnings Per Share (EPS) is a measure of a company's profitability, calculated as net income divided by the number of outstanding shares.

Legal Capital

The portion of a company's capital, represented by the par value of its issued shares, that cannot legally be distributed to shareholders as dividends.

Contributed Capital

Contributed Capital, also known as paid-in capital, refers to the amount of money raised by a company through the sale of its equity shares.

Premium on Common Stock

The amount by which the sale price of a share of common stock exceeds its par value.