Question

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash				$	24,000
Accounts receivable, net					220,000
Merchandise inventory					350,000
Prepaid expenses					6,000
Total current assets					600,000
Property and equipment, net					890,000
Total assets				$	1,490,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities				$	280,000
Bonds payable, 12%					320,000
Total liabilities					600,000
Stockholders’ equity:
Common stock, $5 par value				$	140,000
Retained earnings					750,000
Total stockholders’ equity					890,000
Total liabilities and equity				$	1,490,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	2,290,000
Cost of goods sold		1,190,000
Gross margin		1,100,000
Selling and administrative expenses		620,000
Net operating income		480,000
Interest expense		38,400
Net income before taxes		441,600
Income taxes (30%)		132,480
Net income	$	309,120

Account balances at the beginning of the year were: accounts receivable, $180,000; and inventory, $320,000. All sales were on account.

Assume that Castile Products, Inc., paid dividends of $4.05 per share during the year. Also assume that the company’s common stock had a market price of $72 at the end of the year and there was no change in the number of outstanding shares of common stock during the year.

Required:

Compute financial ratios as follows:

1.	Earnings per share. (Round your answer to 2 decimal places.)

      

2.	Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your final percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)

       

3.	Dividend yield ratio. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)

       

4.	Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)

       

5.	Book value per share. (Round your answer to 2 decimal places.)

       

Answer 1

1) Earnings per share = Income available to common share holders / number of common shares outstanding.

                                   = 309120 / 28000

                                   = $11.04

Number of common shares = 140000 / 5

                                            = 28000 shares

2) Dividend payout ratio = Annual dividend per common share / EPS

                                       = 4.05 / 11.04

                                       = 36.68%

3) Dividend yield ratio = Annual dividend per common shares / market price per share

                                   = 4.05 / 72

                                   = 5.63%

4) Price earnings ratio = Market price per share / EPS

                                    = 72 / 11.04

                                    = $6.52

5) Book value per share = Total share holders equity - Preferred equity / Number of common shares outstanding

                                          = 890000 / 28000

                                          = $31.78

Hope you get that..