Some recent financial statements for Smolira Golf Corp. follow. Smolira Golf Cor
ID: 2811710 • Letter: S
Question
Some recent financial statements for Smolira Golf Corp. follow.
Smolira Golf Corp. has 53,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2018 was $30.
a. What is the price-earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What are the dividends per share? (Round your answer to 2 decimal places, e.g., 32.16.)
c. What is the market-to-book ratio at the end of 2018? (Round your answer to 2 decimal places, e.g., 32.16.)
d. If the company’s growth rate is 6 percent, what is the PEG ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Smolira Golf Corp. has 53,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2018 was $30.
a. What is the price-earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What are the dividends per share? (Round your answer to 2 decimal places, e.g., 32.16.)
c. What is the market-to-book ratio at the end of 2018? (Round your answer to 2 decimal places, e.g., 32.16.)
d. If the company’s growth rate is 6 percent, what is the PEG ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
SMOLIRA GOLF CORP 2017 and 2018 Balance Sheets Assets Liabilities and Owners' Equity 2017 2018 2017 2018 Current assets Current liabilities Cash Accounts $ 35,685$39,032 28,936 43,152 $ 58,136111,120 Accounts payable Notes payable Other $ 38,992$ 43,232 20,308 21,034 18,451 receivable 4,000 25,674 $ 80,334 $ 86,081 $121,500$185,476 Inventory Total Total Long-term debt Owners' equity Common stock and paid-in $56,300$ 56,300 surplus Accumulated retained 265,702 304,846 earnings Fixed assets Net plant and $465,700 $521,583 Total $322,002 361,146 equipment Total liabilities and owners' equity Total assets $523,836 $632,703 $523,836 $632,703
Explanation / Answer
Earnings per share = Net income/Number of common shares outstanding
= 63,144/53,000
= $1.19
(a) Price earning ratio = Market price of 1 common share/Earnings per share
= 30/1.19
= 25.21 times
(b) Dividends per share = Dividend paid/Number of common shares outstanding
= 24,000/53,000
= $0.45
(c) Book value of equity = $361,146
Book value of 1 common share = Book value of equity/Number of common shares outstanding
Hence, book valueof 1 common share = 361,146/53,000
= $6.81
Market to book ratio = Market price of 1 common share/Book value of 1 common share
= 30/6.81
= 4.40 times
(d) PEG ratio = Price earning ratio/Growth rate
= 25.21/6
= 4.20 times
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