Some recent financial statements for Smolira Golf Corp. follow. SMOLIRA GOLF COR

Question

Some recent financial statements for Smolira Golf Corp. follow.

SMOLIRA GOLF CORP 2014 and 2015 Balance Sheets Assets Liabilities and Owners' Equity 2014 2015 2014 2015 Current assets Current liabilities Cash Accounts receivable Inventory $ 24,126 13,248 26,542 $ 24,900 16,000 27,900 Accounts payable Notes payable Other $ 23,984 18,000 12,371 $ 27,900 11,600 16,500 Total $ 63,916 $ 68,800 Total $ 54,355 $56,000 $77,000 $ 87,000 Long-term debt Owners' equity Common stock and paid-in surplus 50,000 215,256 $ 50,000 238,000 Accumulated retained earnings Total Total liabilities and owners equity Fixed assets Net plant and equipment $332,695 $362,200 $265,256 $288,000 Total assets $396,611 $431,000 $396,611 $431,000 SMOLIRA GOLF CORP 2015 Income Statement Sales Cost of goods sold Depreciation $392,907 256,500 48,400 Earnings before interest and taxes Interest paid $ 88,007 15,100 $ 72,907 29,163 Taxable income Taxes (40%) Net income $ 43,744 Dividends Retained earnings $21,000 22,744

Explanation / Answer

Q. 1) Price-earnings ratio = Market price per share / Earnings per share

   a) Market price per share = 24

   b) Earnings per share = 43744 / 30000 = 1.46 (approx)

     Price-earnings ratio = 24 / 1.46 = 16.44 Times

Q. 2) Dividend per share = Dividend / Number of shares oustanding

   = 21000 / 30000

= 0.70 Per Share

Q. 3) Market-to-book ratio = Current market price / Book value per share

   i) Current market price = $ 24

   ii) Book value per share = Total stockhoders equity / Number of shares

= 288000 / 30000

   = $ 9.6

   Market-to-book ratio = 24 / 9.6 = 2.5 Times

Conclusion:-

Price-earnings ratio 16.44 Times Dividend per share 0.70 Per Share Market-to-book ratio 2.50 Times

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