The income statement for Christensen, Inc., appears below. CHRISTENSEN, INC. Inc

Question

The income statement for Christensen, Inc., appears below.

CHRISTENSEN, INC.
Income Statement


For the Year Ended December 31, 2012
Sales $400,000
Cost of goods sold

230,000
Gross profit 170,000
Expenses (including $16,000 interest and $24,000 income taxes)

105,000
Net income

$65,000

Additional information:

The weighted average common shares outstanding in 2012 were 30,000 shares.
The market price of Christensen, Inc. stock was $13 in 2012.
Cash dividends of $26,000 were paid, $5,000 of which were to preferred stockholders.

Instructions

Compute the following ratios for 2012.

(a) Earnings per share. (Round to 2 decimal places, e.g. 10.50.)
(b) Price-earnings. (Round to 1 decimal place, e.g. 10.5.)
(c) Payout. (Round to 0 decimal places, e.g. 125.)
(d) Times interest earned. (Round to 1 decimal place, e.g. 10.5.)

(a) Earnings per share $
(b) Price-earnings times
(c) Payout %
(d) Times interest earned times

Explanation / Answer

Payout % = dividends / net income = 26000/65000 = 0.4 =40%

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