The income statement for Christensen, Inc. appears below. Sales $397800 Cost of
ID: 2355217 • Letter: T
Question
The income statement for Christensen, Inc. appears below.Sales $397800
Cost of goods sold 234500
Gross profit 163300
Expenses (including $16000 interest & $25460 income taxes) 109700
Net income 53600
additional income:
1- the weighted average common shares outstanding in 2011 were 28000 shares.
2- the market price of Christensen, inc. stock was $11 in 2011
3- cash dividends of $29400 were paid $5070 of which were to preferred stockholders.
Compute the following ratios for 2011.
a- earnings per share (round answer to 2 decimal places, eg 10.50 & use the rounded the amount for future calculations.)
b- price-earnings (round answer to 1 decimal places eg 10.5.)
c- payout (round answer to 0 decimal places eg 25%)
d- times interest earned (round answer to 1 decimal place, eg 10.5)
a- earnings per share $ _____
b- price-earnings ____ times
c- payout _____ %
d- times interest earned ____ times
Explanation / Answer
a- earnings per share = (Net Inc-Pref Div)/No of Common shares ie EPS = (53600-5070)/28000 = $1.73 per share b- price-earnings ratio = Price of Share/EPS = $11/$1.73 = 6.4 times c- payout ratio = Dividends Per Share / EPS Dividends Per Share = Div paid to common shareholders/No of common shares = 29400/28000 = $1.05 per share SO payout ratio = Dividends Per Share / EPS = $1.05/$1.73 = 61% d- times interest earned is Times Interest Earned Ratio (TIE) = (net income + interest) / interest. ie TIE = (53600+16000)/16000 = 4.4 times
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.