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| I need help with questions, 2-5. thank you.
Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company’s common stock at the end of the year was $18. 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 | $ | 1,280 | $ | 1,560 | ||
| Accounts receivable, net | 12,300 | 9,100 | ||||
| Inventory | 9,700 | 8,200 | ||||
| Prepaid expenses | 1,800 | 2,100 | ||||
| Total current assets | 25,080 | 20,960 | ||||
| Property and equipment: | ||||||
| Land | 6,000 | 6,000 | ||||
| Buildings and equipment, net | 19,200 | 19,000 | ||||
| Total property and equipment | 25,200 | 25,000 | ||||
| Total assets | $ | 50,280 | $ | 45,960 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 9,500 | $ | 8,300 | ||
| Accrued liabilities | 600 | 700 | ||||
| Notes payable, short term | 300 | 300 | ||||
| Total current liabilities | 10,400 | 9,300 | ||||
| Long-term liabilities: | ||||||
| Bonds payable | 5,000 | 5,000 | ||||
| Total liabilities | 15,400 | 14,300 | ||||
| Stockholders’ equity: | ||||||
| Common stock | 800 | 800 | ||||
| Additional paid-in capital | 4,200 | 4,200 | ||||
| Total paid-in capital | 5,000 | 5,000 | ||||
| Retained earnings | 29,880 | 26,660 | ||||
| Total stockholders’ equity | 34,880 | 31,660 | ||||
| Total liabilities and stockholders’ equity | $ | 50,280 | $ | 45,960 | ||
| Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) |
||||||
| This Year | Last Year | |||||
| Sales | $ | 79,000 | $ | 74,000 | ||
| Cost of goods sold | 52,000 | 48,000 | ||||
| Gross margin | 27,000 | 26,000 | ||||
| Selling and administrative expenses: | ||||||
| Selling expenses | 8,500 | 8,000 | ||||
| Administrative expenses | 12,000 | 11,000 | ||||
| Total selling and administrative expenses | 20,500 | 19,000 | ||||
| Net operating income | 6,500 | 7,000 | ||||
| Interest expense | 600 | 600 | ||||
| Net income before taxes | 5,900 | 6,400 | ||||
| Income taxes | 2,360 | 2,560 | ||||
| Net income | 3,540 | 3,840 | ||||
| Dividends to common stockholders | 320 | 600 | ||||
| Net income added to retained earnings | 3,220 | 3,240 | ||||
| Beginning retained earnings | 26,660 | 23,420 | ||||
| Ending retained earnings | $ | 29,880 | $ | 26,660 | ||
| Required: |
| Compute the following financial data for this year: |
| 1. | Earnings per share. (Round your answer to 2 decimal places.) |
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Question & Answer: omparative financial statements for Weller Corporation, a merchandising company, for the fiscal year…..
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| 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. (Round your answer to 2 decimal places.) |
Expert Answer
| No of shares outstanding | 800,000 | |
| Dividend per share | $0.40 | |
| Market value per share | $18 | |
| Net income | $3,540,000 | |
| Total shareholders’ equity | $34,880,000 | |
| 1 | Earnings per share = (Earnings after tax/No of Shares) = ($3,540,000/800,000) = $4.4250 | |
| 2 | Price earnings ratio = Market price per share/ Earnings per share = ($18/$4.4250) = 4.068 | |
| 3 | Dividend pay-out ratio = Dividend paid/Total earnings after tax =($320,000/$3,540,000)=0.09039 or 9.04% | |
| 4 | Dividend yield ratio = Dividend per share/Market price per share = ($0.40/$18) =2.22% | |
| 5 | Book value per share = Shareholder funds/No of shares = ($34,880,000/800,000) =$43.6 |
