Analyzing Stockholders\' Equity ABC Inc. disclosed the following information in

Question

Analyzing Stockholders' Equity ABC Inc. disclosed the following information in a recent annual report: 2012 2013 Net income Preferred stock dividends Average common stockholders' equity 65,000 7,000 1,300,000 1,600,000 45,000 5,000 Dividend per common share Earnings per share Market price per common share, year end17.50 18.68 1.35 2.10 1.45 2.15 1. Calculate the Return on Common Stockholders' Equity for ABC Inc. for 2012 and 2013. 2. Calculate the Dividend Yield for ABC Inc. for 2012 and 2013. 3. Calculate the Dividend Payout Ratio for ABC Inc. for 2012 and 2013.

Explanation / Answer

Answer 1

Return on common stockholders' equity

= (Net Income - Preferred dividends) / Average Common Stock holder equity

For 2012 = ($45,000 - $5,000) / 1,300,000 = 3.08 %

For 2013 = ($65,000 - $7,000) / 1,600,000 =3.62 %

Answer 2

Dividend Yield = Dividend per common share / Market price per common share

For 2012 = $1.35 /$17.50 = 7.71 %

For 2013 =$1.45 /$18.68 = 7.76 %

Answer 3

Dividend Payout ratio = Dividend per common share / Earning per common share

For 2012 = $1.35 /$2.10 =64.29 %

For 2013 =$1.45 /$2.15 = 67.44 %

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