The income statement for Mary Hatch, Inc., appears below. MARY HATCH, INC. Income Statement ...

Question:

The income statement for Mary Hatch, Inc., appears below.

MARY HATCH, INC.

Income Statement

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

Additional information:

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

c)Payout ratio

(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


Learn more about this topic:

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How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
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