Lake Incorporated and the River, Incorporated reported net incomes of $231,000 and $198,000, respectively, for the most recent fiscal year. Both companies had 55,000 shares of common stock issued and outstanding. The market price per share of Lakes stock was $52, while Rivers sold for $56 per share. Required a. Determine the P/E ratio for each company.

Company	P/E Ratio
Lake, Inc.
River, Inc.

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

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