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Sandhill Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income...

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
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
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

ekkarill92 answered 1 year ago
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