Markus Company\'s common stock sold for $3.25 per share at the end of this year.

Question

Markus Company's common stock sold for $3.25 per share at the end of this year. The company paid a common stock dividend of $0.65 per share this year. It also provided the following data excerpts from this year's financial statements: Ending Beginning Balance Balance Cash Accounts receivable Inventory Current assets Total assets Current liabilities Total liabilities Common stock, $1 par value Total stockholders' equity $ 39,000 $ 35,200 $ 72,000 $ 56,200 $ 61,900 $ 72,000 $ 172,900 $ 163,400 531,000 $550,400 $ 69,000 $ 60,000 $156,000 $ 140,400 $ 132,000 $ 132,000 $ 375,000 $ 410,000 Total liabilities and stockholders' equity $ 531,000 $ 550,400 This Year Sales (all on account) 850,000 $ 493,000 357,000 Net operating income $ 173,375 $ 9,500 $ 114,712 Cost of goods solo Gross margin Interest expense Net income

Explanation / Answer

Solution (1):

Earnings per share (EPS)

= Net Income/Average Common Shares Outstanding

=$ 114,712 / 132,000 shares*

=$ 0.87 (Answer)

*$ 132,000 Common stock, $ 1 par value. So,

Number of common shares = $ 132,000/ $ 1   = 132,000 shares

Solution (3):

Dividend payout ratio

= Dividends per share / EPS X 100

=$ 0.65 / $ 0.87 X 100

=75 % (Answer)

Dividend Yield Ratio

= Dividends per share / Market price per share X 100

=$ 0.65 / $ 3.25 X 100

=20 % (Answer)

Solution (5):

Return on Equity

= Net Income / Average Stockholder’s equity X 100

= Net Income / [(Beginning + Ending Stockholder’s equity)/2] X 100

=$ 114,712 / [($ 410,000 + $ 375,000)/2] X 100

=$ 114,712 /$ 392,500 X 100

= 29 % (Answer)

Solution (7):

Working Capital

=Current Assets -Current Liabilities

=$ 172,900 - $ 69,000

=$ 103,900 (Answer)

Current Ratio

=Current Assets /Current Liabilities

=$ 172,900 / $ 69,000

=2.51 (Answer)

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