RCES KINGBIRD, INC. Income Statement For the Year Ended December 31, 2017 400,00

Question

RCES KINGBIRD, INC. Income Statement For the Year Ended December 31, 2017 400,000 200,000 200,000 Study Expenses (including $10,000 interest and $20,000 income taxes)70,000 130,000 Sales revenue Cost of goods sold Gross proft Net income Additional information: 1. Common stock outstanding January 1, 2017, was 20,000 shares, and 35,000 shares were outstanding at December 31, 2017 2. The market price of Kingbird stock was $12 in 2017 3. Cash dividends of $19,000 were paid, $3,000 of which were to preferred stockholders. Compute the following measures for 2017, (Round all answers to 2 decimal places, eg. 1.83 or 2.51%) (a) Earnings per share (b) Price-earnings ratio (c) Payout ratio (d) Times interest earned 3.63 3.3 times 12.5911 % 16 times

Explanation / Answer

a. EPS= earnings available to equity holders/ average number of shares outstanding

average number of shares outstanding= [opening shares outstanding+closing shares outstanding]/2= [20000+35000]/2= 27500

EPS= 127000/27500= 4.62

c. payout ratio= dividend per share/EPS *100

dividend per share= 16000/35000= 0.4571

payout ratio= 0.4571/4.62 *100= 9.90%

Net income 130000 Less: preferred dividends 3000 Earnings available to equity holders 127000

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