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17 January, 00:37

Account balances at the beginning of the year were: accounts receivable, $180,000; and inventory, $270,000. All sales were on account. Assume that Castile Products, Inc., paid dividends of $2.55 per share during the year. Also assume that the company's common stock had a market price of $70 at the end of the year and there was no change in the number of outstanding shares of common stock during the year.

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  1. 17 January, 00:45
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    Additional information:

    The financial statements for Castile Products, Inc., are given below:

    Castile Products, Inc.

    Balance Sheet

    December 31

    Assets

    Current assets:

    Cash $23,000

    Accounts receivable, net $250,000

    Merchandise inventory $340,000

    Prepaid expenses $8,000

    Total current assets $621,000

    Property and equipment, net $840,000

    Total assets $1,461,000

    Liabilities and Stockholders' Equity

    Liabilities:

    Current liabilities $290,000

    Bonds payable, 11% $300,000

    Total liabilities $590,000

    Stockholders' equity:

    Common stock, $10 par value $130,000

    Retained earnings $741,000

    Total stockholders' equity $871,000

    Total liabilities and equity $1,461,000

    Castile Products, Inc.

    Income Statement

    For the Year Ended December 31

    Sales $2,140,000

    Cost of goods sold $1,230,000

    Gross margin $910,000

    Selling and administrative expenses $600,000

    Net operating income $310,000

    Interest expense $33,000

    Net income before taxes $277,000

    Income taxes (30%) $83,100

    Net income $193,900

    Required:

    Compute financial ratios as follows: 1. Earnings per share. (Round your answer to 2 decimal places.) 2. Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your final percentage answer to 1 decimal place (i. e., 0.1234 should be considered as 12.3%).) 3. Dividend yield ratio. (Round your percentage answer to 1 decimal place (i. e., 0.1234 should be considered as 12.3%).) 4. Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.) 5. Book value per share. (Round your answer to 2 decimal places.)

    Answer:

    $14.92 17.1% 3.6% 4.7 $67

    Explanation:

    1. Earnings per share = net income / average shares outstanding = $193,900 / 13,000 stocks = $14.92

    2. Dividend payout ratio = total dividends / net income = ($2.55 x 13,000) / $193,900 = $33,150 / $193,900 = 17.1%

    3. Dividend yield ratio = dividend per share / market price per share = $2.55 / $70 = 3.6%

    4. Price-earnings ratio = price per share / earnings per share = $70 / $14.92 = 4.7

    5. Book value per share = (stockholders' equity - preferred stocks) / total number of stocks outstanding = $871,000 / 13,000 = $67
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