Question

Here is the income statement for Sarasota, Inc. SARASOTA, INC. Income Statement For the Year Ended...

Here is the income statement for Sarasota, Inc.

SARASOTA, INC.
Income Statement
For the Year Ended December 31, 2022

Sales revenue

 $455,000

Cost of goods sold

 210,000

Gross profit

 245,000

Expenses (including $11,400 interest and $20,000 income taxes)

 106,000

Net income

 $139,000


Additional information:

1. Common stock outstanding January 1, 2022, was 32,500 shares, and 51,800 shares were outstanding at December 31, 2022.
2. The market price of Gillman, Inc., stock was $15 in 2022.
3. Cash dividends of $14,500 were paid, $5,560 of which were to preferred stockholders.


Compute the following measures for 2022. (Round to 2 decimal places, e.g. 17.54% or 6.25: 1 or $2.66.)

(a) Earnings per share $Enter earnings per share in dollars
(b) Price-earnings ratio Enter price-earnings ratio in times times
(c) Payout ratio Enter payout ratio in percentages %
(d) Times interest earned Enter times interest earned times
Business   Accounting   
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Homework Answers

Answer #1

Sol :

a) Average Outstanding shares = (32500+51800) / 2

= 42150

EPS = (Net Income - Preferred dividend) / Average shares outstanding

   = (139000-5560) / 42150

= $3.16

b) P/E Ratio = Market value per share / Earnings per share

= 15 / 3.16

= 4.75

c) Payout Ratio = Dividend paid / Net Income

= 14500 / 139000

= 10.43%

d) Times Interest Earned = Earnings before Interest & Tax / Interest Expense

= Net Income + Interest + Tax / Interest Expense

= (139000+11400+20000) / 11400

= 14.95.

  

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