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 (e) Payout ratio (d) Times interest earned 3.63 3.3 times 12.51 % 16 times

Explanation / Answer

Computation of measures for 2017 (a) earnings per Share = Earnings available to Common stock / Number of common stocks   =($130,000-$3000)/35000 =$3.63 (b) Price earnings ratio = market price per Share /Earnings per share =$12/$3.63 =3.30 times © pay out ratio = Dividend paid to common stock holders /Earnings available to common stock holders   =$16000/$127000 =12.60% (d) Times interest earned = Earnings before Interest and taxes / interest expense =net profit + interest expesne+ tax taxes /Interest expenses =($130,000+$10,000+$20,000 ) /$10,000 =16 times

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