The income statement for Sutherland, Inc., appears below. SUTHERLAND, INC. Incom

Question

The income statement for Sutherland, Inc., appears below.

SUTHERLAND, INC.
Income Statement
For the Year Ended December 31, 2017

Additional information:

Compute the following ratios for 2017. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)

SUTHERLAND, INC.
Income Statement
For the Year Ended December 31, 2017

Net sales $424,000 Cost of goods sold 188,000 Gross profit 236,000 Expenses (including $14,000 interest and $26,000 income taxes) 98,000 Net income $ 138,000

Explanation / Answer

a) Earning per share =( net income-Preferred dividend)/Weighted average common stock

= (138000-5100)/25000

Earning per share = 5.32

b) Price earning ratio = MPS/EPS = 12/5.32 = 2.3 times

c) Payout ratio = DPS*100/EPS = 0.94*100/5.32 = 17.7%

d) Time interest earned = Income before interest and tax/Interest expense

= 236000/14000

Times interest earned = 16.9 times

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