Kris Building Supply sells various building materials to retail outlets. The com
ID: 2497851 • Letter: K
Question
Kris Building Supply sells various building materials to retail outlets. The company has just approached Kingston State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company’s financial statements for the most recent two years follow:
During the past year, the company has expanded the number of lines that it carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. All sales are on account.
Assume that you have just inherited several hundred shares of Kris Building Supply stock. Not being acquainted with the company, you decide to do some analytical work before making a decision about whether to retain or sell the stock you have inherited.
You decide first to assess the well-being of the common stockholders. For both this year and last year, compute the following:
The earnings per share.(Round your answers to 2 decimal places.)
The dividend yield ratio for common stock. The company’s common stock is currently selling for $44 per share; last year it sold for $39 per share. (Do not round intermediate calculations. Round your final answers to 1 decimal place.)
The dividend payout ratio for common stock. (Do not round intermediate calculations. Round your final answers to 1 decimal place.)
The price-earnings ratio. (Do not round intermediate calculations. Round your final answers to 1 decimal place.)
The book value per share of common stock. (Round your answers to 2 decimal places.)
You decide next to assess the company’s rate of return. Compute the following for both this year and last year:
The return on total assets. (Total assets at the beginning of last year were $2,360,000.) (Do not round intermediate calculations. Round your final answers to 1 decimal place.)
The return on common stockholders’ equity. (Stockholders’ equity at the beginning of last year was $1,277,000.) (Do not round intermediate calculations. Round your final answers to 1 decimal place.)
Kris Building Supply sells various building materials to retail outlets. The company has just approached Kingston State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company’s financial statements for the most recent two years follow:
Explanation / Answer
Current year a Earnning Per Share (Net income -Preferred dividends)/Average Common Share Outstanding (310499-20405)/51800 5.60 b The dividend yield ratio for common stock Dividend Per Share/Market Price per Share (98560/51800)/44 4.32% c The dividend payout ratio for common stock. Dividend Per Share/EPS 1.90/5.60 33.93% d The price-earnings ratio Market Price per Share/EPS 44/5.60 7.86 e The book value per share of common stock Common stockholders’ equity/Common Share outsatnding (518000+914267)/51800 27.65 Last Year a Earnning Per Share (Net income -Preferred dividends)/Average Common Share Outstanding (226499-20405)/51800 3.98 b The dividend yield ratio for common stock Dividend Per Share/Market Price per Share (73360/51800)/39 3.63% c The dividend payout ratio for common stock. Dividend Per Share/EPS 1.42/3.9 35.68% d The price-earnings ratio Market Price per Share/EPS 39/3.98 9.80 e The book value per share of common stock Common stockholders’ equity/Common Share outsatnding (518000+722734)/51800 23.95
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