Response to the following :
Q 1. Recent financial statements for Madison Company follow:
Madison Company - Balance Sheet, June 30 :
Assets:
Current assets:
Cash $ 24,000
Accounts receivable, net 260,000
Merchandise inventory 380,000
Prepaid expenses 8,000
Total current assets 672,000
Plant and equipment, net 820,000
Total assets $ 1,492,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities $ 270,000
Bonds payable, 8% 360,000
Total liabilities 630,000
Stockholders' equity:
Common stock, $5 par value $ 150,000
Retained earnings 712,000
Total stockholders' equity 862,000
Total liabilities and stockholders' equity $ 1,492,000
Madison Company - Income Statement, For the Year Ended June 30 :
Sales $ 2,290,000
Cost of goods sold 1,170,000
Gross margin 1,120,000
Selling and administrative expenses 580,000
Net operating income 540,000
Interest expense 28,800
Net income before taxes 511,200
Income taxes 153,360
Net income $ 357,840
Account balances at the beginning of the company's fiscal year were: accounts receivable, $190,000; and inventory, $280,000. All sales were on account.
Assume that Madison Company paid dividends of $3.35 per share during the year. Also assume that the company's common stock had a market price of $73.00 per share on June 30 and that there was no change in the number of outstanding shares of common stock during the fiscal year.
Required:
Compute the following:
1. Earnings per share. (Round your answer to 2 decimal places. )
2. Dividend payout ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)
3. Dividend yield ratio. (Round your answer to 1 decimal place.Omit the "%" sign in your response.)
4. Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)
Q 2. Comparative financial statements for Heritage Antiquing Services for the fiscal year ending December 31 appear on the following page. The company did not issue any new common or preferred stock during the year. A total of 700 thousand shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.75. The market value of the company's common stock at the end of the year was $21. All of the company's sales are on account.
Heritage Antiquing Services
Comparative Balance Sheet (dollars in thousands)
This Year Last Year
Assets
Current assets:
Cash $ 1,100 $ 1,350
Accounts receivable, net 10,600 7,700
Inventory 12,100 11,400
Prepaid expenses 780 650
Total current assets 24,580 21,100
Property and equipment:
Land 10,700 10,700
Buildings and equipment, net 45,844 40,767
Total property and equipment 56,544 51,467
Total assets $ 81,124 $ 72,567
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19,000 $ 18,400
Accrued payables 1,080 870
Notes payable, short term 160 160
Total current liabilities 20,240 19,430
Long-term liabilities:
Bonds payable 9,300 9,300
Total liabilities 29,540 28,730
Stockholders' equity:
Preferred stock 1,000 1,000
Common stock 700 700
Additional paid-in capital 4,000 4,000
Total paid-in capital 5,700 5,700
Retained earnings 45,884 38,137
Total stockholders' equity 51,584 43,837
Total liabilities and stockholders' equity $ 81,124 $ 72,567
Heritage Antiquing Services - Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year Last Year
Sales $ 74,000 $ 66,000
Cost of goods sold 41,000 34,000
Gross margin 33,000 32,000
Selling and administrative expenses:
Selling expenses 11,300 10,500
Administrative expenses 6,900 6,900
Total selling and administrative expenses 18,200 17,400
Net operating income 14,800 14,600
Interest expense 930 930
Net income before taxes 13,870 13,670
Income taxes 5,548 5,468
Net income 8,322 8,202
Dividends to preferred stockholders 50 380
Net income remaining for common stockholders 8,272 7,822
Dividends to common stockholders 525 525
Net income added to retained earnings 7,747 7,297
Retained earnings, beginning of year 38,137 30,840
Retained earnings, end of year $ 45,884 $ 38,137
Required:
Compute the following financial ratios for common stockholders for this year:
1. Gross margin percentage. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
2. Earnings per share of common stock. (Round your answer to 2 decimal places. )
3. Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)
4. Dividend payout ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place. Omit the "%" sign in your response.)
5. Dividend yield ratio. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
6. Return on total assets. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
7. Return on common stockholders' equity. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
8. Book value per share. (Round your answer to 2 decimal places. )