The financial statements for Castile Products, Inc., are given below: |
Castile Products, Inc. Balance Sheet December 31 |
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Assets | ||||||
Current assets: | ||||||
Cash | $ | 23,000 | ||||
Accounts receivable, net | 190,000 | |||||
Merchandise inventory | 380,000 | |||||
Prepaid expenses | 12,000 | |||||
Total current assets | 605,000 | |||||
Property and equipment, net | 840,000 | |||||
Total assets | $ | 1,445,000 | ||||
Liabilities and Stockholders' Equity | ||||||
Liabilities: | ||||||
Current liabilities | $ | 220,000 | ||||
Bonds payable, 10% | 320,000 | |||||
Total liabilities | 540,000 | |||||
Stockholders’ equity: | ||||||
Common stock, $5 par value | $ | 140,000 | ||||
Retained earnings | 765,000 | |||||
Total stockholders’ equity | 905,000 | |||||
Total liabilities and equity | $ | 1,445,000 | ||||
Castile Products, Inc. Income Statement For the Year Ended December 31 |
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Sales | $ | 2,200,000 | |
Cost of goods sold | 1,200,000 | ||
Gross margin | 1,000,000 | ||
Selling and administrative expenses | 580,000 | ||
Net operating income | 420,000 | ||
Interest expense | 32,000 | ||
Net income before taxes | 388,000 | ||
Income taxes (30%) | 116,400 | ||
Net income | $ | 271,600 | |
Account balances at the beginning of the year were: accounts receivable, $170,000; and inventory, $270,000. All sales were on account. |
Assume that Castile Products, Inc., paid dividends of $3.85 per share during the year. Also assume that the company’s common stock had a market price of $67 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 final percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).) |
3. |
Dividend yield ratio. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).) |
4. |
Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.) |
5. |
Book value per share. (Round your answer to 2 decimal places.) |
Solution 1:
Earning per share = Net Income / Weighted average outstanding shares
= $271,600 / 28000 = $9.70 per share
Solution 2:
Dividend payout ratio = Dividend per share / Earning per share = $3.85 / $9.70 = 39.7%
Solution 3:
Dividend yield ratio = Dividend per share/ Market price per share = $3.85 / $67 = 5.7%
Solution 4:
Price earning ratio = Market price per share / Earning per share = $67 / $9.70 = 6.9 times
Solution 5:
Book value per share = Shareholder's Equity / Nos of outstanding shares
= $905,000 / 28000 = $32.32
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