Question

The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc.
Balance Sheet
December 31
Assets
Current assets:
Cash $ 23,000
Accounts receivable, net 190,000
Merchandise inventory 320,000
Prepaid expenses 11,000
Total current assets 544,000
Property and equipment, net 820,000
Total assets $ 1,364,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities $ 200,000
Bonds payable, 11% 340,000
Total liabilities 540,000
Stockholders’ equity:
Common stock, $10 per value $ 110,000
Retained earnings 714,000
Total stockholders’ equity 824,000
Total liabilities and stockholders’ equity $ 1,364,000
Castile Products, Inc.
Income Statement
For the Year Ended December 31
Sales $ 2,290,000
Cost of goods sold 1,170,000
Gross margin 1,120,000
Selling and administrative expenses 610,000
Net operating income 510,000
Interest expense 37,400
Net income before taxes 472,600
Income taxes (30%) 141,780
Net income $ 330,820

Account balances at the beginning of the year were: accounts receivable, $200,000; and inventory, $350,000. All sales were on account.

Assume that Castile Products, Inc., paid dividends of $2.85 per share during the year. Also assume that the company’s common stock had a market price of $53 at the end of the year and there was no change in the number of outstanding shares of common stock during the year.

Required:

Compute financial ratios as follows:

1. Earnings per share. (Round your answer to 2 decimal places.)

2. Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your percentage final answer to 2 decimal places. (i.e., 0.1234 should be entered as 12.34).)

3. Dividend yield ratio. (Round your percentage answer to 2 decimal places. (i.e., 0.1234 should be entered as 12.34).)

4. Price-earnings ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

5. Book value per share. (Round your answer to 2 decimal places.)

Homework Answers

Answer #1
1) Earning per share = Net income / number of shares
= 330820 / (110000/10)
= 30.07 per share
2)  Dividend payout ratio. = Divined Per share/ Earning Per Share
= 2.85/ 30.07
= 0.09
3) Dividend yield ratio = Dividend Per Share/ Market Value Per Share
= 2.85/ 53
= 0.05
4) Price-earnings ratio =  Market Price Per Share/ Earning Per share
= 53/30.07
=1.76
5)  Book value per share
= Total Shareholder's Equity/ No of Shares

= 824000/ ( 110000/10)

=74.90

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