During 2013 Catour, Inc., and Pavie, Inc., reported net incomes of $220,000 and $190,000, respectively. Both companies

Question:

During 2013 Catour, Inc., and Pavie, Inc., reported net incomes of $220,000 and $190,000, respectively. Both companies had 50,000 shares of common stock issued and outstanding. The market price per share of Catour’s stock was $50, while Pavie’s sold for $54 per share.

Required

a. Determine the P/E ratio for each company. (Round to the nearest whole number.)

b. Based on the P/E ratios computed in Requirement a, which company do investors believe has the greater potential for growth in income?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...