Question

Some recent financial statements for Smolira Golf, Inc., follow. SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 3,031 $ 3,007 Accounts payable $ 2,183 $ 2,660 Accounts receivable 4,737 5,721 Notes payable 1,780 2,176 Inventory 12,598 13,722 Other 96 113 Total $ 20,366 $ 22,450 Total $ 4,059 $ 4,949 Long-term debt $ 13,900 $ 16,660 Owners’ equity Common stock and paid-in surplus $ 41,000 $ 41,000 Fixed assets Accumulated retained earnings 15,684 39,550 Net plant and equipment $ 54,277 $ 79,709 Total $ 56,684 $ 80,550 Total assets $ 74,643 $ 102,159 Total liabilities and owners’ equity $ 74,643 $ 102,159 SMOLIRA GOLF, INC. 2016 Income Statement Sales $ 188,570 Cost of goods sold 126,803 Depreciation 5,273 EBIT $ 56,494 Interest paid 1,370 Taxable income $ 55,124 Taxes 19,293 Net income $ 35,831 Dividends $ 11,965 Retained earnings 23,866 Smolira Golf has 12,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2016 was $83. What is the price–earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price–earnings ratio times What is the price–sales ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price–sales ratio times What are the dividends per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Dividends per share $ What is the market-to-book ratio at the end of 2016? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Market-to-book ratio times

Answer 1

Answer a.

Earnings per share = Net income / Number of shares outstanding
Earnings per share = $35,831 / 12,000
Earnings per share = $2.99

Price-earnings ratio = Market price per share / Earnings per share
Price-earnings ratio = $83.00 / $2.99
Price-earnings ratio = 27.76 times

Answer b.

Sales per share = Sales / Number of shares outstanding
Sales per share = $188,570 / 12,000
Sales per share = $15.71

Price-sales ratio = Market price per share / Sales per share
Price-sales ratio = $83.00 / $15.71
Price-sales ratio = 5.28 times

Answer c.

Dividends per share = Dividends / Number of shares outstanding
Dividends per share = $11,965 / 12,000
Dividends per share = $1.00

Answer d.

Book Value per share = Owners’ Equity / Number of shares outstanding
Book Value per share = $80,550 / 12,000
Book Value per share = $6.71

Market-to-book ratio = Market price per share / Book Value per share
Market-to-book ratio = $83.00 / $6.71
Market-to-book ratio = 12.37 times