Modern Building Supply sells various building materials to retail outlets. The c
ID: 2726413 • Letter: M
Question
Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company's financial statements for the most recent two years follow Modern Building Supply Comparative Balance Sheet This Year Last Year Assets Current assets Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 63,000 143,000 14,000 460,000 281,000 600,000 23,000 948,000 19,000 1.490,000 1.061,000 1,645,150 1,501,395 3,135,150 s2,562,395 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities Current liabilities Bonds payable, 10% $ 813,000 434,000 620,000 620,000 1.433,000 1,054,000 Total liabilities Stockholders' equity Preferred stock, $25 par, 7% Common stock, $10 par Retained earnings 267,500 267,500 519,000 915,650 721,895 519,000 1,702.150 1,508,395 Total stockholders' equity 3,135,150 s2,562,395 Total liabilities and stockholder's equityExplanation / Answer
1
Calculation of Earning per share :
This Year
Last Year
Net Income (A)
$ 305,900.00
$ 207,900.00
Common Shares outstanding $519000 / $10 = (B)
51,900
51,900
Earning per share =A/B =
$ 5.89
$ 4.01
2
Calculation of Dividend Yield Ratio :
This Year
Last Year
Dividend Per share (A)
$ 1.80
$ 1.20
($93420 /51900 Shares)
($62280 /51900 Shares)
Stock Price (B)
$ 37.60
$ 30.58
Dividend Yield Ratio = A/B =
4.8%
3.9%
3
Calculation of Dividend Payout Ratio :
This Year
Last Year
Dividend Per share (A)
$ 1.80
$ 1.20
($93420 /51900 Shares)
($62280 /51900 Shares)
Earning per share (B)
$ 5.89
$ 4.01
Dividend Payout Ratio = A/B =
30.6%
29.9%
4
Calculation of Price Earning Ratio:
This Year
Last Year
Stock Price (A)
$ 37.60
$ 30.58
Earning per share (B)
$ 5.89
$ 4.01
Price Earning Ratio = A/B =
6.4
7.6
1
Calculation of Earning per share :
This Year
Last Year
Net Income (A)
$ 305,900.00
$ 207,900.00
Common Shares outstanding $519000 / $10 = (B)
51,900
51,900
Earning per share =A/B =
$ 5.89
$ 4.01
2
Calculation of Dividend Yield Ratio :
This Year
Last Year
Dividend Per share (A)
$ 1.80
$ 1.20
($93420 /51900 Shares)
($62280 /51900 Shares)
Stock Price (B)
$ 37.60
$ 30.58
Dividend Yield Ratio = A/B =
4.8%
3.9%
3
Calculation of Dividend Payout Ratio :
This Year
Last Year
Dividend Per share (A)
$ 1.80
$ 1.20
($93420 /51900 Shares)
($62280 /51900 Shares)
Earning per share (B)
$ 5.89
$ 4.01
Dividend Payout Ratio = A/B =
30.6%
29.9%
4
Calculation of Price Earning Ratio:
This Year
Last Year
Stock Price (A)
$ 37.60
$ 30.58
Earning per share (B)
$ 5.89
$ 4.01
Price Earning Ratio = A/B =
6.4
7.6
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