In: Accounting
Sandhill Medical manufactures hospital beds and other
institutional furniture. The company’s comparative balance sheet
and income statement for 2015 and 2016 follow.
Sandhill Medical Comparative Balance Sheet As of December 31 |
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2016 | 2015 | ||||
Assets | |||||
Current assets | |||||
Cash | $317,000 | $417,500 | |||
Accounts receivable, net | 1,067,700 | 776,450 | |||
Inventory | 735,000 | 681,100 | |||
Other current assets | 383,000 | 247,100 | |||
Total current assets | 2,502,700 | 2,122,150 | |||
Property, plant, & equipment, net | 9,618,120 | 8,340,460 | |||
Total assets | $12,120,820 | $10,462,610 | |||
Liabilities and Stockholders’ Equity | |||||
Current liabilities | $3,180,000 | $2,846,050 | |||
Long-term debt | 3,702,650 | 3,892,700 | |||
Total liabilities | 6,882,650 | 6,738,750 | |||
Preferred stock, $5 par value | 56,900 | 56,900 | |||
Common stock, $0.25 par value | 135,000 | 103,900 | |||
Retained earnings | 5,046,270 | 3,563,060 | |||
Total stockholders’ equity | 5,238,170 | 3,723,860 | |||
Total liabilities and stockholders’ equity | $12,120,820 | $10,462,610 |
Sandhill Medical Comparative Income Statement and Statement of Retained Earnings For the Year |
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2016 | 2015 | ||||
Sales revenue (all on account) | $10,280,000 | $9,613,900 | |||
Cost of goods sold | 4,273,000 | 5,298,750 | |||
Gross profit | 6,007,000 | 4,315,150 | |||
Operating expenses | 2,840,200 | 2,634,200 | |||
Net operating income | 3,166,800 | 1,680,950 | |||
Interest expense | 390,000 | 308,650 | |||
Net income before taxes | 2,776,800 | 1,372,300 | |||
Income taxes (30%) | 833,040 | 411,690 | |||
Net income | $1,943,760 | $960,610 | |||
Dividends paid | |||||
Preferred dividends | 29,550 | 29,550 | |||
Common dividends | 431,000 | 490,000 | |||
Total dividends paid | 460,550 | 519,550 | |||
Net income retained | 1,483,210 | 441,060 | |||
Retained earnings, beginning of year | 3,563,060 | 3,122,000 | |||
Retained earnings, end of year | $5,046,270 | $3,563,060 |
Calculate the price/earnings ratio (market price of $45 at
year-end) for 2016. (Round answer to 2 decimal places,
e.g. 2.55.)
Price/earnings ratio |
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Sandhill | |
Workings | 2016 |
Net Income | 1,943,760.00 |
Less: Preferred dividends | 29,550.00 |
Net Income available for common share holders | 1,914,210.00 |
Common Stock | 135,000.00 |
Par value | 0.25 |
Number of shares in Common Stock | 540,000.00 |
Market price per share | 45.00 |
Earnings Per share | |
Net Income available for common share holders /Number of shares in Common Stock | 3.54 |
Price Earnings Ratio | |
Market Price/ Earnings Per share on Common Stock | 12.69 |