7.3 Onelogin News | Dashboard CengageNOWv2 x C Chegg Study | Guide C Chegg Study

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7.3

Onelogin News | Dashboard CengageNOWv2 x C Chegg Study | Guide C Chegg Study | Guide ? ? ? ? ? v2 cengagenow con intake ssignment takeAssignmen Main doi voker-assignments& takeAssignmentSessionLoca or-assignment t ? ? ? ? Ch 17-3 Exercises and Problems eBook Calculator Print Item Five Measures of Solvency or Profitability 1. EX.17-01.ALGO The balance sheet for Garcon Inc. at the end of the current fiscal year indicated the following Bonds payable, 6% Preferred $5 stock, $50 par Common stock, $12 par Income before income tax was $165,600, and income taxes were $25,350, for the current year. Cash dividends paid on common stock during the current year totaled $36,231. The common stock was selling for $110 per share at the end of the year 2. EX.17-04.ALGO $1,200,000 85,000 158,100.00 3. EX.17-05.ALGO 4. EX.17-06.ALGO 5. EX.17-19.ALGO 6. EX.17-20.ALGO 7. EX.17-21.ALGO 8. PR.17-04.ALGO Determine each of the following. Round answers to one decimal place, except for dollar amounts which should be rounded to the nearest whole cent. Use the rounded answers for subsequent requirements, if required a. Times interest earned ratio times b. Earnings per share on common stock c. Price-earnings ratio d. Dividends per share of common stock e. Dividend yield Check My Work 2 more Check My Work uses remaining Previous Next Type here to search 2:52 AM 4/20/2018 25

Explanation / Answer

Solution a:

Times interest earned ratio = EBIT / Interest

Interest expense = $1,200,000*6% = $72,000

Earning before tax = $165,600

Earning before interest and taxes = EBT + Interest expense = $165,600 + $72,000 = $237,600

Times interest earned ratio = $237,600 / $72,000 = 3.3 times

Solution b:

Earning per share on common stock = Earnings for common shareholders / Outstanding shares

Earnings for common shareholders = Earning before taxes - Income tax expense - Preference dividend

= $165,600 - $25,350 - (1700*$5) = $131,750

Outstanding common shares = $158,100 / 12 = 13175

Earning per share = $131,750 / 13175 = $10 per share

Solution c:

Price earning ratio = Market price per share / Earning per share = $110 / $10 = 11 times

Solution d:

Dividend per share of common stock = Dividend paid / Outstanding common share

= $36,231 / 13175 = $2.75 per share

Solution e:

Dividend yield = Dividend per share / Market price per share

= $2.75 / $110 = 2.50%

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