Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 820,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company’s common stock at the end of the year was $19.00. All of the company’s sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	3,812		$	3,980
Accounts receivable, net		12,500			9,200
Inventory		9,800			8,280
Prepaid expenses		1,820			2,140
Total current assets		27,932			23,600
Property and equipment:
Land		6,200			6,200
Buildings and equipment, net		19,400			19,200
Total property and equipment		25,600			25,400
Total assets	$	53,532		$	49,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	9,700		$	8,400
Accrued liabilities		640			800
Notes payable, short term		320			320
Total current liabilities		10,660			9,520
Long-term liabilities:
Bonds payable		7,500			7,500
Total liabilities		18,160			17,020
Stockholders' equity:
Common stock		820			820
Additional paid-in capital		4,300			4,300
Total paid-in capital		5,120			5,120
Retained earnings		30,252			26,860
Total stockholders' equity		35,372			31,980
Total liabilities and stockholders' equity	$	53,532		$	49,000

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	81,000		$	76,000
Cost of goods sold		53,000			49,000
Gross margin		28,000			27,000
Selling and administrative expenses:
Selling expenses		8,700			8,200
Administrative expenses		12,200			11,200
Total selling and administrative expenses		20,900			19,400
Net operating income		7,100			7,600
Interest expense		900			900
Net income before taxes		6,200			6,700
Income taxes		2,480			2,680
Net income		3,720			4,020
Dividends to common stockholders		328			656
Net income added to retained earnings		3,392			3,364
Beginning retained earnings		26,860			23,496
Ending retained earnings	$	30,252		$	26,860

Required:

Compute the following financial data for this year:

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

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

3. Dividend payout ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

4. Dividend yield ratio. (Round your answer to 2 decimal places.)

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

Answer 1

Ans. 1	Earnings per share = Net income / Common stock outstanding
	$3,720,000 / 820,000
	$4.54	per share
Ans. 2	Price earnings ratio = Stock price per share / Earnings per share
	$19 / $4.54
	4.19	times
Ans. 3	Dividend yield ratio = Dividend per share / Stock price per share * 100
	$0.40 / $19 * 100
	2.11%
Ans. 4	Payout ratio =   Total dividends / Net income
	$328,000 / $3,720,000 * 100
	8.82%
Ans. 5	Book value per share =    Total common stockholder's equity / no. of shares outstanding
	$35,372,000 / 820,000
	$43.14	per share