Exercise 14-9 The income statement for Sutherland, Inc., appears below. SUTHERLA

Question

Exercise 14-9

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

SUTHERLAND, INC.
Income Statement
For the Year Ended December 31, 2017

Additional information:

Compute the following ratios for 2017. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8% .)

SUTHERLAND, INC.
Income Statement
For the Year Ended December 31, 2017

Net sales $416,000 Cost of goods sold 198,000 Gross profit 218,000 Expenses (including $18,000 interest and $26,000 income taxes) 86,000 Net income $ 132,000

Explanation / Answer

Answer

Earning per share = net income - preferred dividend / weighted average common shares outstanding

= 132000 - 7200 / 31000

= 4.0

price - earning ratio = market price per share / earning per share

= 14 / 4.0

= 3.5 times

payout ratio = dividend / net income * 100

= 29500 / 132000 * 100

= 22.3 %

times interest earn = earnings before interest and taxes / total interest expense

= ( net income + interest expense + tax expense ) / total interest expense

= 132000 + 18000 + 26000 / 18000

= 176000 / 18000

= 9.7 times

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