Financial statements for Larkins Company appear below: Larkins Company Statement

Question

Financial statements for Larkins Company appear below:

Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)


Current assets: Year 2 Year 1
Cash and marketable securities $180 $180
Accounts receivable, net 210 180
Inventory 130 120
Prepaid expenses 50 50
Total current assets 540 530
Noncurrent assets:
Plant & equipment, net 1,540 1,480
___________________

Total assets $2,110 $2,010


Current liabilities:
Accounts payable $100 130
Accrued liabilities 60 60
Notes payable, short term 90 120
__________________
Total current liabilities 250 310
Noncurrent liabilities:
Bonds payable 480 500
___________________
Total liabilities 730 810
Stockholders' equity:
Preferred stock, $20 par, 10% 120 120
Common stock, $10 par 180 180
Additional paid-in capital--common stock 240 240
Retained earnings 840 660
____ ___
Total stockholders' equity 1380 1200
____ ____
Total liabilities & stockholders' equity 2110 2010
_____ _____
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands

Sales (all on account) $2,760
Cost of goods sold 1,930
_____
Gross margin 830
Selling and administrative expense 330
_____
Net operating income 500
Interest expense 50
______
Net income before taxes 450
Income taxes (30%) 135
_____
Net income 315
_____


Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.


Larkins Company's dividend yield ratio on December 31, Year 2 was closest to:

A. 4.1%.
B. 2.1%.
C. 5.0%.
D. 4.6%

Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.


Larkins Company's return on total assets for Year 2 was closest to:

A. 16.0%.
B. 13.6%.
C. 17.0%.
D. 15.3%.

Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.


Larkins Company's book value per share at the end of Year 2 was closest to:

A. $76.67.
B. $70.00.
C. $23.33.
D. $10.00

Explanation / Answer

Larkins Company's dividend yield ratio on December 31, Year 2 was closest to:
D. 4.6% Working: Dividend yield ratio = Dividend per share / market value per share Dividend for common stock holders = 135 - 12 = $123,000 Common stock = 180000 / 10 = 18000 Dividend for share = 123000 / 18000 = 6.8333 Market value per share = $150 Dividend yield ratio = 6.8333 / 150*100 = 4.6% Dividend yield ratio = Dividend per share / market value per share Dividend for common stock holders = 135 - 12 = $123,000 Common stock = 180000 / 10 = 18000 Dividend for share = 123000 / 18000 = 6.8333 Market value per share = $150 Dividend yield ratio = 6.8333 / 150*100 = 4.6%
Larkins Company's return on total assets for Year 2 was closest to:
Return on total assets = Earning Befor Interest & Tax / Total Net Assets*100 Earning Before Interest & Tas = $500 Net assets = $2,110 Return on total assets = 500 / 2110*100 = 23.7% Larkins Company's book value per share at the end of Year 2 was closest to:

B. $70.00.
Book value of equity = Equity / Total Common stock Common shareholders equity = $1260000 Shares = 18000 Book value of equity = 1260000 / 18000 = $70 Thank you.... Dividend yield ratio = Dividend per share / market value per share Dividend for common stock holders = 135 - 12 = $123,000 Common stock = 180000 / 10 = 18000 Dividend for share = 123000 / 18000 = 6.8333 Market value per share = $150 Dividend yield ratio = 6.8333 / 150*100 = 4.6%

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