Hartzog Corporation\'s most recent balance sheet and income statement appear bel

Question

Hartzog Corporation's most recent balance sheet and income statement appear below: Statement of Financial Position December 31, Year 2 and Year 1 (in thousands of dollars) Year 2 Year 1 Assets Current assets: Cash $250 $220 Accounts receivable 400 380 Inventory 200 350 Prepaid expenses 40 40 Total current assets 890 990 Plant and equipment, net 920 930 Total assets $1,810 $1,920 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $110 $240 Accrued liabilities 20 20 Notes payable, short term 150 150 Total current liabilities 280 410 Bonds payable 230 250 Total liabilities $510 $660 Stockholders' equity: Preferred stock, $100 par value, 5% 100 240 Common stock, $2 par value 610 610 Additional paid-in capital--common stock 190 190 Retained earnings 400 220 Total stockholders' equity 1,300 1,260 Total liabilites & stockholders' equity $1,810 $1,920 Income Statement For the Year Ended December 31, Year 2 (in thousands of dollars) Sales (all on account) $3,900 Cost of goods sold 2,340 Gross margin 1,560 Selling and administrative expense 1,150 Net operating income 410 Interest expense 60 Net income before taxes 350 Income taxes (30%) 105 Net income $245 Dividends on common stock during Year 2 totaled $60 thousand. Dividends on preferred stock totaled $5 thousand. The market price of common stock at the end of Year 2 was $7.04 per share. The times interest earned for Year 2 is closest to: 6.83 5.83 3.00 4.08

Explanation / Answer

3. The earnings per share of common stock for Year 2 is closest to: 214 / 2 = 107 shares of common stock outstanding (280 net income - 5 preferred dividends) / 107 = $2.57 4. The price-earnings ratio for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.) 7.70 market price per share / 2.57 earnings per share = 3.00 5. The dividend payout ratio for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.) 62 total dividends / 107 shares outstanding = $0.58 dividends per share $0.58 dividends per share / 2.57 earnings per share = 22.6%

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