The financial statements for Castile Products, Inc., are given below: Castile Pr

Question

The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 20,000 Accounts receivable, net 260,000 Merchandise inventory 350,000 Prepaid expenses 11,000 Total current assets 641,000 Property and equipment, net 880,000 Total assets $ 1,521,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 290,000 Bonds payable, 9% 310,000 Total liabilities 600,000 Stockholders’ equity: Common stock, $10 par value $ 140,000 Retained earnings 781,000 Total stockholders’ equity 921,000 Total liabilities and equity $ 1,521,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales $ 2,260,000 Cost of goods sold 1,230,000 Gross margin 1,030,000 Selling and administrative expenses 640,000 Net operating income 390,000 Interest expense 27,900 Net income before taxes 362,100 Income taxes (30%) 108,630 Net income $ 253,470 Account balances at the beginning of the year were: accounts receivable, $200,000; and inventory, $280,000. All sales were on account. Assume that Castile Products, Inc., paid dividends of $3.05 per share during the year. Also assume that the company’s common stock had a market price of $62 at the end of the year and there was no change in the number of outstanding shares of common stock during the year. Required: Compute financial ratios as follows:

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

2. Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your final percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)

4. Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)

5. Book value per share. (Round your answer to 2 decimal places.) ReferenceseBook & Resources WorksheetDifficulty: 1 EasyLearning Objective: 13-06 Compute and interpret financial ratios that managers use to assess market performance. Check my work ©2016 McGraw-Hill Education. All rights reserved.

Explanation / Answer

1 EPS = net income / average outstanding common shares Net Income = $253470 average outstanding common shares = Common Stock capital/face vaue = $140000/10$ = 14000 stock EPS= $253470/14000 = 18.105 $/stock 2 Dividend payout Ratio = Yearly dividend per share/Earning er share = ($3.05/18.105)*100 = 16.84618 % 4 P/E Ratio = Market rice per share/EPS = $62/18.105 = 3.424468 5 Book Value per share =Stock holders Equity/No of shares Stock Holders equity = Value of common stosk+ Retained Earnings+ Current year Earnings = $140000+$781000+$253470 = 1174470 $ Book Value per share =Stock holders Equity/No of shares = $1174470/14000 = 83.89071 per share

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