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 940,000 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 $25. 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 $ 5,304 $ 5,350 Accounts receivable, net 15,800 10,450 Inventory 10,400 8,760 Prepaid expenses 1,940 2,380 Total current assets 33,444 26,940 Property and equipment: Land 7,400 7,400 Buildings and equipment, net 20,600 20,400 Total property and equipment 28,000 27,800 Total assets $ 61,444 $ 54,740 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 10,900 $ 9,000 Accrued liabilities 880 1,400 Notes payable, short term 440 440 Total current liabilities 12,220 10,840 Long-term liabilities: Bonds payable 10,000 10,000 Total liabilities 22,220 20,840 Stockholders' equity: Common stock 940 940 Additional paid-in capital 4,900 4,900 Total paid-in capital 5,840 5,840 Retained earnings 33,384 28,060 Total stockholders' equity 39,224 33,900 Total liabilities and stockholders' equity $ 61,444 $ 54,740

Explanation / Answer

1) Earnings per share = Net income / Shares outstanding EPS = $5,700,000/940,000 shares $6.06 Per share 2)Price-earnings ratio = Market Price/EPS P/E Ratio = $25/$6.06 4.12 times 3) Dividend payout ratio = Dividend Paid/ Net Income Dividend payout Ratio = $376,000/$5700000 6.60% 5). Dividend yield ratio Dividend Yield = Dividend per share/ Market price per share DPS = $376,000/940,000 $0.40 per share Dividend Yield = $.40/$25 1.60% 6) Book value per share = Total stockholder's equity/ Outstanding Shares Book value per share = $39,224,000/940,000 $41.73 per share

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