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 910,000 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 SOA this year. The market value of the company's common sock at the end of the year was $24. All of the company's sales are on account Weller Corporation Comparative Balance Sheet dollars in thousands) This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses $1,506 $1,720 15,500 10,300 10,2508,640 1,910 2,320 Total current assets 29.16622,980 Property and equipment: 7,100 7,100 20,30020,100 Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 27 400 27,200 $56,566 $50,180 Current liabilities: Accounts payable Accrued liabilities Notes payable, short term $10,600 $8,850 820 1,250 410 410 11,830 10.510 6,250 6,250 18,08016,760 Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity 910 910 Common stock Additional paid-in capital 4,760 4,750 5,6605,660 Total paid-in capital Retained earnings 32,826 27,760 38,48633,420 $56,566 $50,180 Total stockholders equity Total liablitdes and stookholders equity

Explanation / Answer

Req 1: Earnings per share Net income after tax: $ 5,430,000 Number of Common Shares: 910,000 shares Earnings per share = Net Income after tax/ Number of Common Shares    (   5430,000 /910,000 ) = $ 5.97 per share Req 2: Price Earnings Ratio = Market price per share / Earnings per share Market price per share : $ 24 per share Earnings per share : $ 5.97 per share Price Earning rario = $ 24 / $ 5.97 = 4.02 times Req 3: Dividend Payout ratio = Dividend per share / Earnings per share *100 Earnings per share : $ 5.97 per share Total Dividend to shareholder = $ 364,000 Number of Shares = 910,000 Dividend per share = Total Dividend / Number of shares ( 364,000 /910,000 ) = $ 0.40 per share Dividend Payout ratio = Dividend per share / Earnings per share ( 0.40 / 5.97 ) = 6.70% Req 4: Dividend Yield ratio Dividend per share = $ 0.40 per share Market price per share = $ 24 per share Dividend yield ratio = Dividend per share / Market Price per share *100 ( 0.40 / 24) *100 = 1.67%

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