Question

Here is the income statement for Tamarisk, Inc. TAMARISK, INC. Income Statement For the Year Ended...

Here is the income statement for Tamarisk, Inc.

TAMARISK, INC.
Income Statement
For the Year Ended December 31, 2017

Sales revenue

$414,600

Cost of goods sold

232,500

Gross profit

182,100

Expenses (including $16,700 interest and $27,200 income taxes)

84,100

Net income

$ 98,000


Additional information:

1. Common stock outstanding January 1, 2017, was 21,800 shares, and 38,100 shares were outstanding at December 31, 2017.
2. The market price of Tamarisk stock was $13 in 2017.
3. Cash dividends of $24,000 were paid, $3,800 of which were to preferred stockholders.


Compute the following measures for 2017. (Round all answers to 2 decimal places, e.g. 1.83 or 2.51%)

(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
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Homework Answers

Answer #1

A.

Average outstanding common shares=(beginning common shares + ending common shares)/2

= (21800 + 38100) / 2 = 29950 shares

Earnings per share = (Net income - preferred dividend)/ Average outstanding common shares

= ($98000 - $3800) / 29950 = $3.14524 or $3.15 per share

B.

Price Earning Ratio = Market price / Earnings per share = $13/ $3.14524 = 4.13 Times

C.

Payout ratio = Common Dividend paid / Net income = (24000-3800) / 98000 = 20.61%

D.

Times Interest Earnings = (net Income + interest + Income tax) / Interest expense

= (98000 + 16700 + 27200) / 16700

=141900/16700

= 8.50 times

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