Ratio
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Assume the following financial data:
Short-term assets . . . . . . . . . . . . . . . . . . . . . $200,000
Long-term assets . . . . . . . . . . . . . . . . . . . . . . 350,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . $550,000
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . $100,000
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 50,000
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 150,000
Common stock . . . . . . . . . . . . . . . . . . . . . . . 150,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . 250,000
Total liabilities and stockholders' equity . . . . $550,000
Total earnings (after-tax) . . . . . . . . . . . . . . . . $ 48,000
Dividends per share . . . . . . . . . . . . . . . . . . . . $ 1.10
Stock price . . . . . . . . . . . . . . . . . . . . . . . . $ 54
Shares outstanding . . . . . . . . . . . . . . . . . . . . . 16,000
a. Compute the P/E ratio (stock price to earnings per share).
b. Compute the ratio of stock price to book value per share (note that
book value equals stockholders' equity).
c. Compute the dividend yield.
d. Compute the payout ratio.
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The solution explains various ratio calculations.
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a. Compute the P/E ratio (stock price to earnings per share).
P/E is given as Market price /Earnings per Share (EPS)
EPS = Net Income/No. of Share
EPS = 48,000/16,000 = $3
Market price = 54
P/E = 54/3
b. Compute the ...
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