The income statement for Mary Hatch, Inc., appears below.
MARY HATCH, INC.
For the Year Ended December 31, 2012
Net sales $400,000
Cost of goods sold 230,000
Gross profit 170,000
Expenses (including $16,000 interest and $24,000 income taxes) 105,000
Net income $ 65,000
1.The weighted-average common shares outstanding in 2012 were 30,000 shares.
2.The market price of Mary Hatch, Inc. stock was $13 in 2012.
3.Cash dividends of $26,000 were paid, $5,000 of which were to preferred stockholders.
Compute the following ratios for 2012. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .)
Earnings per share $..........
Price-earnings times Payout..........%
Times interest earned..........times
Earning Per Share:
Earning per share is the total amount of money earned on an individual share bought. This is a micro-level of the calculation of the profit earned by investing in the shares of the company.
Answer and Explanation:
a) Earnings per share
(Net Income - Preferred stock dividends) / Average common shares outstanding
=65,000-5,000 / 30,000 = 2
b) $13 / Earnings per share
= 6.5 times
(26,000 - 5,000) /65,000 = 32.3 %
d)Times interest earned ratio
Earnings before Interest and Tax / Interest expenses
(65,000 + 16,000+24,000)/16,000 = 6.56 times
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Learn more about this topic:
from Introduction to Business: Homework Help ResourceChapter 24 / Lesson 14