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In: Accounting

The financial statements of Friendly Fashions include the following selected data (in millions):      ($ in...

The financial statements of Friendly Fashions include the following selected data (in millions):
  

  ($ in millions) 2018 2017
  Sales $ 10,043   $ 11,134  
  Net income $ 312   $ 818  
  Stockholders' equity $ 1,850   $ 2,310  
  Average Shares outstanding (in millions) 675   -
  Dividends per share $ 0.31  
  Stock price $ 6.20   -


Required:

Calculate the following ratios for Friendly Fashions in 2018

Return on equity, Dividend yield,earnings per share,Price earnings ratio

Solutions

Expert Solution

Answer)

Calculation of return on Equity for 2018

Return on Equity for 2018 = Net Income for 2018/ Stockholders’ Equity

                                                 = $ 312 million / $ 1,850 million

                                                = 16.86%

Therefore return on equity for 2018 is 16.86%.

Calculation of Dividend Yield for 2018

Dividend Yield for 2018 = Dividend per share for 2018/ Stock price per share

                                            = $ 0.31 / $ 6.20

                                            = 5.00%

Therefore dividend yield for 2018 is 5.00%.

Calculation of Earnings per share for 2018

Earnings per share for 2018 = Net Income for 2018/ Average shares outstanding

                                                   = $ 312 million / 675 million

                                                   = $ 0.4622 per share

Therefore Earnings per share for 2018 is $ 0.4622

Calculation of Price Earnings Ratio for 2018

Price earnings for 2018 = Stock Price per share / Earnings per share

                                            = $ 6.20 / $ 0.4622

                                            = 13.41 times

Therefore Price earnings ratio for 2018 is 13.41 times

ekkarill92 answered 2 years ago
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