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 870,000 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. All of the company’s sales are on account.

Required:

Compute the following financial data for this year:

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

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

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

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

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

Weller Corporation
Comparative Balance Sheet
(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 2,242 $ 3,130 Accounts receivable, net 15,100 10,100 Inventory 10,050 8,480 Prepaid expenses 1,870 2,240 Total current assets 29,262 23,950 Property and equipment: Land 6,700 6,700 Buildings and equipment, net 19,900 19,700 Total property and equipment 26,600 26,400 Total assets $ 55,862 $ 50,350 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 10,200 $ 8,650 Accrued liabilities 740 1,050 Notes payable, short term 370 370 Total current liabilities 11,310 10,070 Long-term liabilities: Bonds payable 7,500 7,500 Total liabilities 18,810 17,570 Stockholders' equity: Common stock 870 870 Additional paid-in capital 4,550 4,550 Total paid-in capital 5,420 5,420 Retained earnings 31,632 27,360 Total stockholders' equity 37,052 32,780 Total liabilities and stockholders' equity $ 55,862 $ 50,350

Explanation / Answer

1. Earings per share = Net income/no of common share

                             = 4620000/870000

Earning per share = 5.31 per share

2) Price earning ratio = MPS/EPS

                                = 22/5.31

Price earning ratio = 4.14

3) Dividend payout ratio = DPS/EPS

                                  = 0.40/5.31

Dividend payout ratio = 7.53%

4) dividend yield ratio = DPS*100/MPS

                                = 0.40*100/22

Dividend yield ratio= 1.82%

5) Book value per share = Total Book value/no of shares

                                    = 37052000/870000

Book value per share = 42.59 per share

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