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Computing Ratios for Income Statements

The income statement for Christensen, Inc., appears below.

Income Statement
For the Year Ended December 31, 2011

Sales: $401,100
Cost of goods sold: 228,100
Gross profit: 173,000
Expenses (including $15,000 interest and $25,000 income taxes): 102,300
Net income: $70,700

Additional information:
1.The weighted average common shares outstanding in 2011 were 30,000 shares.
2.The market price of Christensen, Inc. stock was $12 in 2011.
3.Cash dividends of $21,700 were paid, $5,030 of which were to preferred stockholders. Compute the following ratios for 2011.
(a)Earnings per share
(b) Price-earnings
(c) Payout
(d) Times interest earned

Solution Preview

(a) Earnings per share -- for this ratio, we calculate as follows: net income minus the dividends paid to preferred stockholders (5030) / average number of ...

Solution Summary

In this solution, I help the student calculate the following ratios:

(a)Earnings per share
(b) Price-earnings
(c) Payout
(d) Times interest earned