Foundational [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6] Markus Company\'s common s

Question

Foundational [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6] Markus Company's common stock sold for $2.50 per share at the end of this year. The company paid a common stock dividend of $0.40 per share this year. It also provided the following data excerpts from this year's financial statements: Ending Beginning Balance $31,500 47800 $ 56,000 46,300 $50,800 56,000 $138,300 150,100 $ 417000 405,300 $ 57,000 39,000 $117000 105,300 $ 114,000 114,000 $300,000 300,000 $ 417,000 405,300 Balance Cash Accounts receivable Current assets Total assets Current liabilities Total liabilities Common stock, $1 par value Total stockholders' equity Total liabilities and stockholders' equity Sales (all on account) Cost of goods sold Gross margin Net operating income Interest expense Net income This Year $ 650,000 $ 377,000 $ 273,000 $120,750 $7000 $ 96,900

Explanation / Answer

Answer to Part 1.
Earning per Share = Net Income available for Distribution / Common Stock Outstanding
Common Stock Outstanding = 114,000 /1 = 114,000 Shares
Earning per Share = 96,900 / 114,000
Earning per Share = $0.85

Answer to Part 2.
Price-Earning Ratio = Price per share / Earning per Share
Price-Earning Ratio = 2.50 / 0.85
Price-Earning Ratio = 2.94

Answer to Part 3.
Dividend Payout Ratio = Dividend paid / Net Income * 100
Dividend Paid = 114,000 * $0.40 = $45,600
Dividend Payout Ratio = 45,600 / 96,900 * 100
Dividend Payout Ratio = 47.06%

Dividend Yield Ratio = Dividend per share / Current price per share * 100
Dividend Yield Ratio = 0.40 / 2.50 * 100
Dividend Yield Ratio = 16%

Answer to Part 4.
Return on Total Assets = Income before Interest and Income Tax / Average Total Assets
Average Total Assets = (417,000 + 405,300) / 2
Average Total Assets = $411,150

Return on Total Assets = 120,750 / 411,150
Return on Total Assets = 29.37%

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