Question & Answer: omparative financial statements for Weller Corporation, a merchandising company, for the fiscal year…..

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.)

 

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
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