Question

The income statement for Sutherland, Inc., appears below. SUTHERLAND, INC. Income Statement For the Year Ended December 31, 2017 Net sales $400,000 Cost of goods sold 180,000 Gross profit 220,000 Expenses (including $10,000 interest and $20,000 income taxes) 80,000 Net income $ 140,000 Additional information: 1. The weighted-average common shares outstanding in 2017 were 20,000 shares. 2. The market price of Sutherland, Inc. stock was $10 in 2017. 3. Cash dividends of $20,000 were paid, $3,000 of which were to preferred stockholders. Compute the following ratios for 2017. (Round Earnings per share to 2 decimal places, e.g. 1.75, and all other answers to 1 decimal place, e.g. 6.8 or 6.8% .) Earnings per share $Entry field with incorrect answer now contains modified data Price-earnings ratio Entry field with correct answer times Payout ratio Entry field with correct answer % Times interest earned Entry field with incorrect answer now contains modified data times

Answer 1

1	Earnings per share =Net Income for common shareholders / average no. of common shares outstanding
	Earnings per share =($140,000 - $3,000) / 20,000 shares =$137,000 / 20,000 shares =$6.85 per share
2	Price-earning ratio =Price of share / Earning pre share
	Price-earning ratio =$10 / $6.85 =1.5 times
3	Payout ratio =Total dividends paid / Net Income =$20,000 / $140,000 =14.3%
4	Times Interest earned ratio =EBIT / Interest expenses
	Times Interest earned ratio =($80,000+$10,000+$20,000) / $10,000
	Times Interest earned ratio =$110,000 / $10,000 =11 times