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    Earnings per share, dividend payout & price-earning ratio, etc.

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    Financial statements for Praeger Company appear below:

    Praeger Company
    Statement of Financial Position
    December 31, 19X6 and 19X5
    (dollars in thousands)

    19X6 19X5
    Current assets:
    Cash and marketable securities $100 $100
    Accounts receivable, net 170 170
    Inventory 110 110
    Prepaid expenses 60 60
    Total current assets 440 440
    Noncurrent assets:
    Plant & equipment, net 2,020 1,990
    Total assets $2,460 $2,430

    Current liabilities:
    Accounts payable $140 $170
    Accrued liabilities 70 50
    Notes payable, short term 100 120
    Total current liabilities 310 340
    Noncurrent liabilities:
    Bonds payable 500 500
    Total liabilities 810 840
    Stockholders' equity:
    Preferred stock, $5 par, 5% 100 100
    Common stock, $5 par 200 200
    Additional paid-in capital--common stock 200 200
    Retained earnings 1,150 1,090
    Total stockholders' equity 1,650 1,590
    Total liabilities & stockholders' equity $2,460 $2,430

    Praeger Company
    Income Statement
    For the Year Ended December 31, 19X6
    (dollars in thousands)

    Sales (all on account) $1,100
    Cost of goods sold 770
    Gross margin 330
    Operating expenses 130
    Net operating income 200
    Interest expense 50
    Net income before taxes 150
    Income taxes (30%) 45
    Net income $105

    Dividends during 19X6 totalled $45 thousand, of which $5 thousand were preferred dividends.
    The market price of a share of common stock on December 31, 19X6 was $30.


    Compute the following for 19X6:
    (a.) Earnings per share of common stock.

    (b.) Price-earnings ratio.

    (c.) Dividend payout ratio.

    (d.) Dividend yield ratio.

    (e.) Return on total assets.

    (f.) Return on common stockholders' equity.

    (g.) Book value per share.

    (h.) Working capital.

    (i.) Current ratio.

    (j.) Acid-test (quick) ratio.

    (k.) Accounts receivable turnover.

    (l.) Average collection period (age of receivables).

    (m.) Inventory turnover.

    (n.) Average sale period (turnover in days).

    (o.) Times interest earned.

    (p.) Debt-to-equity ratio.

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    Solution Preview

    Compute the following for 19X6:
    (a.)   Earnings per share of common stock.
    =Net Income -Preferred Dividends 2.5
    Number of Shares

    Number of shares= Equity share capital/Par value per share

    (b.)   Price-earnings ratio.
    =Price/Eps 12

    (c.)    Dividend payout ratio. 42.86%
    =Equity Dividend/Net Income

    (d.)   Dividend ...

    Solution Summary

    The response provides the steps to compute the Dividend payout ratio.