Comparative financial statements for Weller Corporation, a merchandising company

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 880,000 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 $22.00. All of the company’s sales are on account.

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

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

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

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

Book value per share. (Round your answer to 2 decimal places.)

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 880,000 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 $22.00. All of the company’s sales are on account.

Explanation / Answer

Solution :

(a) Earning per share = (Net Income - Prefence dividend) ÷ number of outstanding common shares

= ($4,710,000 - 0) ÷ 880,000

= $5.35

(b) Price earning ratio = Price of share ÷ Earning per share

= $22 ÷ $5.35

= 4.11

(c) Dividend payout ratio = (Dividend per share ÷ Earning per share)x 100

= ($0.40 ÷ $5.35) x 100

= 7.48%

(d) Dividend yield ratio = (Dividend per share ÷ price of share) x 100

= ($0.40 ÷ $22) x 100

= 1.82%

(e) Book value per share = Total stockholders' equity ÷ number of outstanding common shares

= $37,298,000 ÷ 880,000

= $42.38

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