Question

Dove, Inc., had additions to retained earnings for the year just ended of $636,000. The firm paid out $75,000 in cash dividends, and it has ending total equity of $7.31 million.

a.	If the company currently has 680,000 shares of common stock outstanding, what are earnings per share? Dividends per share? What is book value per share? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
b.	If the stock currently sells for $30.10 per share, what is the market-to-book ratio? The price-earnings ratio? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
c.	If total sales were $10.61 million, what is the price-sales ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

(a)-Earnings per share, Dividends per share, Book value per share

Earnings per share = Net Income / Number of shares outstanding

= [Retained earnings + Cash Dividends paid] / Number of shares outstanding

= [$636,000 + $75,000] / 680,000 Shares

= $711,000 / 680,000 Shares

= $1.05 per share

Dividends per share = Cash dividends paid / Number of shares outstanding

= $75,000 / 680,000 Shares

= $0.11 per share

Book value per share = Total Equity / Number of shares outstanding

= $7,310,000 / 680,000 Shares

= $10.75 per share

(b)-Market-to-book ratio, Price-earnings ratio

Market-to-book ratio = Market price per share / Book value per share

= $30.10 per share / $10.75 per share

= 2.80 Times

Price-earnings ratio = Market price per share / Earnings per share

= $30.10 per share / $1.05 per share

= 28.79 Times

(c)-Price-sales ratio

Sales per share = Sales / Number of shares

= $10,610,000 / 680,000 Shares

= $15.60 per share

Price–sales ratio = Market Price per share / sales per share

= $30.10 per share / $15.60 per share

= 1.93 Times