Sokov Company’s income statement information follows. Number of times interest w

Question

Sokov Company’s income statement information follows.

   

   

    

     

Number of times interest was earned. (Round your answers to 2 decimal places.)

Interest earned 2014: ________ times

Interest Earned 2013: ________ times

  

Earnings per share based on the average number of shares outstanding. (Round your answers to 2 decimal places.)

Earnings per share 2014: $ _______

Earnings per share 2013: $ _______

Price-earnings ratio (market prices: 2014, $64 per share; 2013, $78 per share). (Do not round intermediate calculations and round final answers to 2 decimal places.)

Return on average equity. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45.))

   

Net margin. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45.))

2014 2013   Net sales $ 480,000 $ 320,000   Income before interest and taxes 120,000 98,000   Net income after taxes 81,000 72,000   Interest expense 9,000 8,000   Stockholders’ equity, December 31 (2012: $200,000) 300,000 240,000   Common stock, December 31 240,000 200,000

Explanation / Answer

Answer:a Number of times interest was earned:

Times Interest earned=EBIT/Interest charges

Interest earned 2014: (120000/9000) =13.33 times

Interest Earned 2013: (98000/8000) =12.25 times

Answer:b Earnings per share=Net income available to equity shareholders/No. of share outstanding

Earnings per share 2014: $81000/9600 shares=$8.4375 per share

Earnings per share 2013: $72000/8000 share=$9 per share

Answer:c Price-earnings ratio=MPS/EPS

P/E ratio 2014=$64/$8.4375=7.585 times

P/E ratio 2013=$78/$9=8.67 times

Answer:d Return on equity=(Net income/stockholder equity)*100

2014=(81000/[(300000+240000)/2])*100=30%

2013=(72000/[(240000+120000)/2])*100=40%

Answer:e Net margin=(Net income/Net sales )*100

2014=(81000/480000)*100=16.875%

2013=(72000/320000)*100=22.5%

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