Year 2 Year 1 Current assets: Cash and marketable securities Accounts receivable
ID: 2352516 • Letter: Y
Question
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders' equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in
capital common stock
Retained earnings
Total stockholders' equity
Total liabilities &
stockholders' equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Larkins Company's dividend payout ratio for Year 2 was closest to
A. 14.8%. b. 24.6%. C. 40.6%. D. 42.9%.
Book value per share at the end of the year 2 was closest to:
a. 10.00 b. 76.67 c. 23.33 d. 70.00
Larkins Company's dividend yield ratio for Year 2 was closest to
a. 2.1% b. 4.1% c. 5.0% d. 4.6%
Larkins Company's return on common stockholders' equity for Year 2 was closest to
a. 24.4% b. 23.5% c. 26.9% d. 25.9%
Explanation / Answer
Price earning ratio on December 31, Year 2 was : C. 8.57 Working: Price Earning Ratio = Market price of the share / Earning per share Earning per share = Total income / No of shares Number of shares = Common stock / Each one cost = 180000 /10 = 18000 Net income = $315,000 Earning per share = 315000 / 18000 = $17.5 Market Price of Share = $150 Price Earning Ratio = 150 / 17.5 = 8.57 Price Earning Ratio = Market price of the share / Earning per share Earning per share = Total income / No of shares Number of shares = Common stock / Each one cost = 180000 /10 = 18000 Net income = $315,000 Earning per share = 315000 / 18000 = $17.5 Market Price of Share = $150 Price Earning Ratio = 150 / 17.5 = 8.57Thank you.... Price Earning Ratio = Market price of the share / Earning per share Earning per share = Total income / No of shares Number of shares = Common stock / Each one cost = 180000 /10 = 18000 Net income = $315,000 Earning per share = 315000 / 18000 = $17.5 Market Price of Share = $150 Price Earning Ratio = 150 / 17.5 = 8.57
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