In: Accounting
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
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