Business, 05.05.2020 05:19, lizdeleon248

PA11-5 Computing and Interpreting Return on Equity (ROE) and Price/Earnings (P/E) Ratios [LO 11-5] Two online magazine companies reported the following in their financial statements: BusinessWorld Fun and Games 2018 2017 2018 2017 Net income $ 110,000 $ 108,604 $ 91,420 $ 172,173 Total stockholders' equity 587,186 512,814 447,151 467,049 Earnings per share 3.20 3.19 2.10 3.98 Stock price when annual results reported 54.40 51.04 32.55 59.70 Required: 1-a. Compute the 2018 ROE for each company. 1-b. Which company appears to generate greater returns on stockholders’ equity in 2018? 2-a. Compute the 2018 P/E ratio for each company. 2-b. Which company do investors appear to value more?

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PA11-5 Computing and Interpreting Return on Equity (ROE) and Price/Earnings (P/E) Ratios [LO 11-5] T...