Exercise 11-19A (Algo) Using the P/E ratio LO 11-9

Lake Inc. and River Inc. reported net incomes of $204,000 and $164,000, respectively, for the most recent fiscal year. Both companies had 40,000 shares of common stock issued and outstanding. The market price per share of Lakes stock was $67, while Rivers sold for $71 per share.

Required a. Determine the P/E ratio for each company.

Lake Inc______ P/E Ratio

River Inc______P/E Ratio

b. Which company do investors believe has the greater potential for growth in income?