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 1,000,000 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 $28. 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 $1,300 $ 1,610 9,250 9,000 2,500 16,400 10,700 2,000 Total current assets 30,400 22,360 Property and equipment: Land 8,000 8,000 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 21,200 21,000 29,20029,000 $59,600 $51,360 Current liabilities Accounts payable Accrued liabilities Notes payable, short term $11,500 $ 9,300 1,700 500 1,000 500 Total current liabilities Long-term liabilities 13,000 11,500 5,000 18,000 16,500 Bonds payable 5,000 Total liabilities Stockholders' equity: Common stock Additional paid-in capital 1,000 1,000 5,2005,200 6,200 Total paid-in capital Retained earnings 6,200 35,400 28,660 41,600 34,860 $59,600 $51,360 Total stockholders' equity Total liabilities and stockholders' equity Weller Corporation Comparative Income Statement and Reconciliation dollars in thousands) Sales Cost of goods sold This Year Last Year $99,000 $94,000 62,000 58,000

Explanation / Answer

1. Earnings per share = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares

= ($7140000 - $0)/1000000 = $7.14

2. Price-Earnings Ratio = Market Value per Share / Earnings per Share

= $28/$7.14 = 3.92

3. Dividend payout ratio = Dividend per share/Earnings per share

= $0.4/$7.14 = 5.60%

4. Dividend yield ratio = Dividend per share/Market price per share

= $0.4/$28 = 1.42%

5. Book value per share = (Total stockholders' equity - Preferred Equity)/Total outstanding shares

= ($41600000 - $0)/1000000 = $41.6

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