Exercise 15-6 Financial Ratios for Assessing Market Performance LO15-6] Comparat

Question

Exercise 15-6 Financial Ratios for Assessing Market Performance LO15-6] Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 980,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.40. The market value of the company's common stock at the end of the year was $27.00. All of the company's sales are on account.

Explanation / Answer

Ans 1 EPS=Net Income/Weighted average Common stock outstanding 6510/980 6.64 Ans 2 PE ratio=Market Price/EPS 27/6.64 4.07 Ans 3 Dividemd Payout ratio Total Dividend /Net Income 392/6510 0.06 Ans 4 Dividend Yield ratio Cash Dividend Per share/Market vale per share= .4/27 0.01 Ans 5 Book value per share Stockholder Equity/Average shares outstanding 40658/980 41.49

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