Question

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.)

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