The Balance Sheets at the End of Each of the First

question 74

Multiple Choice

The balance sheets at the end of each of the first two years of operations indicate the following: $\begin{array}{|l|l|l|}\hline2012&2013\\\hline\$ 560,000 & \$ 600,000 & \text { Total current assets } \\\hline 40,000 & 60,000 & \text { Total investments } \\\hline 700,000 & 900,000 & \text { Total property, plant, and ecuipment } \\\hline 80,000 & 125,000 & \text { Total current liabilities } \\\hline 250,000 & 350,000 & \text { Total long-term liabilities } \\\hline 100,000 & 100,000 & \text { Preferred } 9 \% \text { stock } \$ 100 \mathrm{prr} \\\hline 600,000 & 600,000 & \text { Common stock, } \$ 10 \text { prr } \\\hline 60,000 & 60,000 & \text { Paid-in capital in excess of par--common stock } \\\hline 210,000 & 325,000 & \text { Retained earnings }\\\hline\end{array}$

Based on the above information, if net income is $130,000 and interest expense is $40,000 for 2013, and the market price is $40, what is the price-earnings ratio on common stock (round to one decimal place) ?

• A) 14.9
• B) 18.4
• C) 17.3
• D) 19.8

---

Definitions:

Handshake

A traditional greeting in which two people grasp and shake each other's hands.

Germans

Refers to the people originating from or associated with the country of Germany.

Handshake

A gesture involving the grasping and shaking of hands, traditionally used to greet someone or seal an agreement.

Geert Hofstede

A Dutch social psychologist known for his work on the comparison of cultures across nations, especially for developing the cultural dimensions theory.