Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 990,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 12%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. The market value of the company’s common stock at the end of the year was $27.50. All of the company’s sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	5,834		$	6,650
Accounts receivable, net		16,300			9,200
Inventory		10,650			8,960
Prepaid expenses		1,990			2,480
Total current assets		34,774			27,290
Property and equipment:
Land		7,900			7,900
Buildings and equipment, net		21,100			20,900
Total property and equipment		29,000			28,800
Total assets	$	63,774		$	56,090
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	11,400		$	9,250
Accrued liabilities		980			1,650
Notes payable, short term		490			490
Total current liabilities		12,870			11,390
Long-term liabilities:
Bonds payable		10,000			10,000
Total liabilities		22,870			21,390
Stockholders' equity:
Common stock		990			990
Additional paid-in capital		5,150			5,150
Total paid-in capital		6,140			6,140
Retained earnings		34,764			28,560
Total stockholders' equity		40,904			34,700
Total liabilities and stockholders' equity	$	63,774		$	56,090

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	98,000		$	93,000
Cost of goods sold		61,500			57,500
Gross margin		36,500			35,500
Selling and administrative expenses:
Selling expenses		10,400			9,900
Administrative expenses		13,900			12,900
Total selling and administrative expenses		24,300			22,800
Net operating income		12,200			12,700
Interest expense		1,200			1,200
Net income before taxes		11,000			11,500
Income taxes		4,400			4,600
Net income		6,600			6,900
Dividends to common stockholders		396			792
Net income added to retained earnings		6,204			6,108
Beginning retained earnings		28,560			22,452
Ending retained earnings	$	34,764		$	28,560

Compute the following financial data for this year:

1.	Earnings per share. (Round your answer to 2 decimal places.)

      

2.	Price-earnings ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

       

3.	Dividend payout ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

       

4.	Dividend yield ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

       

5.	Book value per share

Answer 1

1

Earning Per share = Net income / Average number of shares outstanding

Earning Per share = $6,600,000 / 990,000

Earning Per share = $6.67

2.

Price Earning Ratio = Market Value per Share / Earnings per Share

Price Earning Ratio = $27.50 / $6.67

Price Earning Ratio = 4.12

3.

Dividend payout ratio = Total Dividends/ Net Income

Dividend payout ratio = $396,000 / $6,600,000

Dividend payout ratio = 6.00%

4.

Dividend Yield Ratio = Dividend per share/current share price

Dividend Yield Ratio = $0.40 / $27.50

Dividend Yield Ratio = 1.45%

5.

Book value per share = common stockholders equity / number of shares

Book value per share = $40,904,000 / 990,000

Book value per share = $41.32

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