Question

The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc.
Balance Sheet
December 31
  Assets
  Current assets:
     Cash $ 18,000
     Accounts receivable, net 190,000
     Merchandise inventory 310,000
     Prepaid expenses 8,000
  Total current assets 526,000
  Property and equipment, net 890,000
  Total assets $ 1,416,000
  Liabilities and Stockholders' Equity
  Liabilities:
     Current liabilities $ 240,000
     Bonds payable, 10% 330,000
  Total liabilities 570,000
  Stockholders’ equity:
     Common stock, $5 par value $ 130,000
     Retained earnings 716,000
  Total stockholders’ equity 846,000
  Total liabilities and equity $ 1,416,000
Castile Products, Inc.
Income Statement
For the Year Ended December 31
  Sales $ 2,290,000
  Cost of goods sold 1,240,000
  Gross margin 1,050,000
  Selling and administrative expenses 630,000
  Net operating income 420,000
  Interest expense 33,000
  Net income before taxes 387,000
  Income taxes (30%) 116,100
  Net income $ 270,900

   Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $260,000. All sales were on account.

Assume that Castile Products, Inc., paid dividends of $4.05 per share during the year. Also assume that the company’s common stock had a market price of $63 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.)


Homework Answers

Answer #1

1.Earning Per Share= Total Earning Available to common stock holders/No of shares of common   stock

No of Equity shares=130000/5=26000

EPS = Net Income/No of Equity Shares

=270900/26000

=$10.41 Per share.

2. Dividend payout ratio.

= Dividends per share /Earning per share

=4.05/10.41=38.90%

3.Dividend Yield Ratio.

=Annual Dividends Per share/Market Price per Share

=4.05/63

=6.42%

4.Price earning ratio.

=Market Value per Share / Earnings per Share

=63/10.41=6.05

5.Book value per share

=Shareholders' Equity - Preferred Shares /Total Number of Outstanding Shares

Shareholders Equity=common stock value + Retained Earnings=130000+716000=716000

Total Number of shares outstanding= Common stock-treasury stock=130000/5=26000

Therefore

716000/26000=$27.53

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