The financial statements of Friendly Fashions include the following selected dat
ID: 2512462 • Letter: T
Question
The financial statements of Friendly Fashions include the following selected data (in millions):
Required:
Calculate the following ratios for Friendly Fashions in 2018. (Enter your Dividend yield and Price-earning ratio values to two decimal places. Enter your answer in millions (i.e. 5,500,000 should be entered as 5.5).)
Required:
Calculate the following ratios for Friendly Fashions in 2018. (Enter your Dividend yield and Price-earning ratio values to two decimal places. Enter your answer in millions (i.e. 5,500,000 should be entered as 5.5).)
Explanation / Answer
Net Income
÷
Average stockholders' equity
=
Return on equity
$170
÷
$2000
=
8.5%
Dividend per share
÷
Dividend yield
Stock price
=
Dividend yield
$.28
÷
$8.00
=
3.5%
Net income
÷
Earnings per share
Average shares outstanding
=
Earnings per share
$170
÷
$710
=
0.23
Stock price
÷
Price earnings ratio
Earnings per share
=
Price earnings ratio
$8.00
÷
0.23
=
35
Explanation:
Average stockholders' equity ($2220 + $1780)/2 = $2000
Net Income
÷
Average stockholders' equity
=
Return on equity
$170
÷
$2000
=
8.5%
Dividend per share
÷
Dividend yield
Stock price
=
Dividend yield
$.28
÷
$8.00
=
3.5%
Net income
÷
Earnings per share
Average shares outstanding
=
Earnings per share
$170
÷
$710
=
0.23
Stock price
÷
Price earnings ratio
Earnings per share
=
Price earnings ratio
$8.00
÷
0.23
=
35
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