The income statement for Christensen, Inc-, appears below. Additional informatio

Question

The income statement for Christensen, Inc-, appears below. Additional information: The weighted average common shared outlining in 2010 were 30,000 shares. The market price of Christensen, Inc, stock was $ 13 in 2010. Catch dividend of $ 26,000 were paid $5,000 of which were to preferred stock holders. Instructions Compute the following rations for 2010 Earnings per share.(Round to 2 decimal places, e.g. 10.50.) price-carryings.(Round to 1 decimal place, e.g. 10.5) payout. (Round to 0 decimal places, e.g. 125.) times interest earned. (Round to 1 decimal place, e,g. 10.5.)

Explanation / Answer

1. EPS = (Net Income - Pref div)/No of common shares = (65,000-5000)/30000 = $2.00 2. PE ratio = Price per share/EPS = $13/$2 = 6.5 3. Payout Ratio = Dividend/Net Income = 26000/65000 = 40% 4. TIE ratio = EBIT/Int Paybale on Bonds etc Expenses = 105,000 & include Income Tax=24000 & Interest 16000 SO EBIT = Net Incoem + Int + ITax = 65,000 + 16000+24000 = 105,000 So TIE Ratio = 105,000/16,000 = 6.6

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