Comparative financial statements for Weller Corporation, a merchandising company

Question

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.

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 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.

Explanation / Answer

Solution:

1) Earnings Per Share = Net Income / No. Of Common Stock outstanding at the end of year

This year net income = $3,540,000

Outstanding Common Stock at the end of this year = 800,000 shares of common stock

Earnings Per Share (this year) = $3,540,000 / 800,000 = $4.425 or $4.43

2) Price Earnings Ratio (This year) = Market Price Per Share / Earnings Per Share = $18 / $4.43 = 4.06

3) Dividend Payout Ratio (this year) = Dividend Per Share / Earnings Per Share x 100 = $0.40 / $4.43 x 100 = 9.03%

4) Dividend Yield Ratio (this year) = Dividend Per Share / Market Price Per share x 100 = $0.40 / $18 x 100 = 2.22%

5) --- please ask separate question as it involved lot of calculation.

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