Advar × CO Not secure ezto.mheducation.com/hm.tpx Two online magazine companies

Question

Advar × CO Not secure ezto.mheducation.com/hm.tpx Two online magazine companies reported the following in their financial statements Fun and Games 2015 2014 BusinessWorld $105,500 $107,704 $ 86,000 $171.273 Net income Total stockholders' equity Earnings per share 542,186 467,814 402.151 422,049 3.08 Stock price when annual results reported 52.15 4879 3030 57.45 2.00 229 1.20 Required: 1.a. Compute the 2015 ROE for each company (Round your answers to 1 decimal place.) BusinessWorld Fun and Games 1.b. Which company appears to generate greater returns oi stockholders equity in 2015? Fun and Games Eotth Companies appear to generase the ame relum on equity 2-a. Compute the 2015 P/E rato for each company (Round your answers io 1 decimal place.) P/E Rat BusinessWorld Fun and F3

Explanation / Answer

1-a.

ROE(return on equity) = Net Income / Average equity

1b.

Both companies appear to generate the same return on equity (as ROE is same)

2-a.

P/E ratio = Market price per share / Earnings per share

Average equity BusinessWorld 505,000 [(542,186+467,814)/2] Fun and Games 412,100 [(402,151+422,049)/2]

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