Fowler Company reported these figures for 2016 and 2015: 2016 2015 Income Statem
ID: 2492989 • Letter: F
Question
Fowler Company reported these figures for 2016 and 2015:
2016 2015
Income Statement—partial:
Net Income $21,900 $ 19,000
Balance Sheet-partial:
Dec. 31, 2016 Dec. 31, 2015
Total Assets $250,000 $265,000
Paid-In Capital:
Preferred Stock—10%, $11 Par Value; 95,000 shares $ 99,000 $99,000
authorized, 9,000 shares issued and outstanding
Common Stock—$1 Par Value; 90,000 shares 60,000 60,000
authorized; 60,000 shares issued and outstanding
Paid-In Capital in Excess of Par—Common 25,000 25,000
Retained Earnings 52,000 40,000
Total Stockholders' Equity $236,000 $ 224,000
Requirements
1. Compute Company's earnings per share for . Assume the company paid the minimum preferred dividend during 2016
2. Compute Company's price/earnings ratio for 2016. Assume the company's market price per share of common stock is $5
3. Compute Company's rate of return on common stockholders' equity for 2016 . Assume the company paid the minimum preferred dividend during .
Requirement 1. Compute Fowler ?Company's earnings per share for 2016. Assume the company paid the minimum preferred dividend during 2016
Select the? formula, then enter the amounts to calculate the? company's earnings per share for 2016
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Earnings per share
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Requirement 2. Compute Fowler ?Company's price/earnings ratio for 2016. Assume the? company's market price per share of common stock is $ 5.
Select the? formula, then enter the amounts to calculate the? company's price/earnings ratio for 2016
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Price/earnings ratio
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Requirement 3. Compute Fowler ?Company's rate of return on common? stockholders' equity for 2016. Assume the company paid the minimum preferred dividend during 2016
Select the? formula, then enter the amounts to calculate the? company's rate of return on common? stockholders' equity for 2016
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Rate of return on common SE
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%
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Earnings per share
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Explanation / Answer
Solution 1:
Earning per share = (net income - Preferred dividend)/ Outstanding Common shares
Preferred Divident = $99000 *10% = $9,900
EPS = ($21900 - $9900) / 60000 = $0.2 per share
Solution 2:
Price-earning ratio = Market price per share / Earning per share = $5 / $0.2 = 25 times
Solution 3:
Rate of return on common SE = Earning for common Sttockholders / Average Common Stockholders' Equity
Earnings for Common Stockholders = net income - preferred dividend = $21900 - $9900 = $12,000
Average Common Stockholders' Equity = (Beginning Common stockholders' equity + Ending Common stockholders' equity) / 2
= [(60000 +25000 + 52000) + (60000 +25000 + 40000)] / 2 = $131,000
Rate of return on common SE = Earning for common Sttockholders / Average Common Stockholders' Equity
= $12000 / $131000 = 9.16%
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