Question

Exercise 12-82 Stockholder Ratios Financial statements for Steele Inc. follow. Steele Inc. Consolidated Income Statements (in...

Exercise 12-82
Stockholder Ratios

Financial statements for Steele Inc. follow.

Steele Inc.
Consolidated Income Statements
(in thousands except per share amounts)
2019 2018 2017
Net sales $7,245,088 $6,944,296 $6,149,218
Cost of goods sold (5,286,253) (4,953,556) (4,355,675)
Gross margin $1,958,835 $1,990,740 $1,793,543
General and administrative expenses (1,259,896) (1,202,042) (1,080,843)
Special and nonrecurring items 2,617 0 0
Operating income $701,556 $788,698 $712,700
Interest expense (63,685) (62,398) (63,927)
Other income 7,308 10,080 11,529
Gain on sale of investments 0 9,117 0
Income before income taxes $645,179 $745,497 $660,302
Provision for income taxes (254,000) (290,000) (257,000)
Net income $391,179 $455,497 $403,302
Steele Inc.
Consolidated Balance Sheets
(in thousands)
ASSETS Dec. 31, 2019 Dec. 31, 2018
Current assets:
Cash and equivalents $320,558 $41,235
Accounts receivable 1,056,911 837,377
Inventories 733,700 803,707
Other 109,456 101,811
Total current assets $2,220,625 $1,784,130
Property and equipment, net 1,666,588 1,813,948
Other assets 247,892 248,372
Total assets $4,135,105 $3,846,450
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $250,363 $309,092
Accrued expenses 347,892 274,220
Other current liabilities 15,700 0
Income taxes 93,489 137,466
Total current liabilities $707,444 $720,778
Long-term debt 650,000 541,639
Deferred income taxes 275,101 274,844
Other long-term liabilities 61,267 41,572
Total liabilities 1,693,812 1,578,833
Stockholders’ equity:
Preferred stock $100,000 $100,000
Common stock 89,727 89,727
Additional paid-in capital—common stock 128,906 127,776
Retained earnings 2,397,112 2,136,794
$2,715,745 $2,454,297
Less: Treasury stock, at cost (274,452) (186,680)
Total stockholders’ equity $2,441,293 $2,267,617
Total liabilities and stockholders’ equity $4,135,105 $3,846,450

Use the information provided above and below to respond to the following requirements.

Year ended December 31,
Item 2019 2018
Average number of common shares outstanding (thousands) 362,202 364,398
Preferred dividends (thousands) $24,000 $24,000
Dividends per common share 0.36 1.54
Common dividends (thousands) 130,861.00 561,172.30
Common stock repurchases 0 0
Market price per share:
High 83.25 79.10
Low 63.25 59.00
Close 78.42 66.36

At January 1, 2018, total stockholders' equity was $2,083,122 and there was no preferred stock.

Required:

1. Compute the earnings per share, return on common equity, dividend yield ratio, and dividend payout ratio (in percentage terms, rounded to two decimal places except for EPS, which should be rounded to nearest cent) for 2018 and 2019.

2019 2018
Earnings per share $fill in the blank 1 $fill in the blank 2
Return on common equity %

Homework Answers

Answer #1
2019 2018
Earnings Per Share

Net Income attributable to Common Stockholders before Common Dividend

(Refer Note 1)

$367,179 $431,497
Divide by: Average number of Common Shares Outstanding 362202 364398
Earnings Per Share $1.01 $1.18
Note 1 - 2019 2018
Net Income $391,179 $455,497
Less: Preferred Dividend $24,000 $24,000
Net Income attributable to common stockholders $367,179 $431,497
Return on Common Equity
Net Income attributable to common stockholders (Refer Note 1) $367,179 $431,497
Divide by: Average Common Stockholders' Equity Fund (Refer Note 1) $2,254,455 $2,125,370
Return on Common Equity 16.3% 20.3%
Note 2 -- 2019 2018
Ending Common Equity (Total Stockholdes Equity - Preffered Stock) $2,341,293 $2,167,617
Beginning Common Equity (Total Stockholdes Equity - Preffered Stock) $2,167,617 $2,083,122
Average Common Equity (Ending+Beg)/2 $2,254,455 $2,125,370
Dividend Yield Ratio
Dividend Per Common Share $0.36 $1.54
Market Price Per Share $78.42 $66.36
Dividend Yield Ratio (Dividend Per Share / Market Price Per Share x 100) 0.46% 2.32%
Dividend Payout Ratio
Dividend Per Share $0.36 $1.54
Earnings Per Share $1.01 $1.18
Dividend Payout Ratio (DPS / EPS x 100) 35.51% 130.05%
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