The Balance Sheets at the End of Each of the First

question 51

Multiple Choice

The balance sheets at the end of each of the first two years of operations indicate the following: If net income is $115,000 and interest expense is $30,000 for 2012, what are the earnings per share on common stock for 2012, (round to two decimal places) ?

• A) $2.07
• B) $1.92
• C) $1.77
• D) $1.64

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Definitions:

Times Interest Earned Ratio

A financial metric measuring a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Income Statement

A financial report that shows a company's revenue, expenses, and profits over a specific period.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, crucial in discounting and investment decision making.

Compounded Annually

A method of calculating interest where the accumulated interest is added to the principal at the end of each year, thereby earning interest in subsequent years.