In: Accounting
QUALITATIVE ANALYSIS:
1) The following information was available for the year ended December 31, 2019:
Net income ----------------------------- $ 180,000
Average total assets ------------------ 2,000,000
Dividends per share ------------------------- 1.44
Earnings per share -------------------------- 4.00
Market price per share at year-end ------- 72.00
Required:
a) Calculate the price/earnings ratio for 2019.
b) Calculate the dividend payout ratio for 2019.
c) Calculate the dividend yield for 2019.
2) The following information was available for the year ended December 31, 2019:
Earnings before interest and taxes (operating income) -------------- $ 97,500
Interest expense ---------------------------------------------------------- 15,000
Income tax expense ----------------------------------------------------- 22,500
Net income -------------------------------------------------------------- 60,000
Total assets at year-end --------------------------------------------------- 288,000
Total liabilities at year-end ------------------------------------------------ 216,000
Required:
a) Calculate the debt ratio at December 31, 2019.
b) Calculate the debt/equity ratio at December 31, 2019.
c) Calculate the time's interest earned for the year ended December 31, 2019.
Ans. 1a | Price earnings ratio = Market price per share / Earnings per share | ||
$72.00 / $4.00 | |||
18 times | |||
Ans. 1b | Payout ratio = Dividends per share / Earnings per share | ||
$1.44 / $4.00 | |||
36.00% | |||
Ans. 1c | Dividend yield ratio = Dividend per share / Stock price per share | ||
$1.44 / $72.00 | |||
2.00% | |||
Ans. 2a | Debt ratio = Total liabilities / Total assets | ||
$216,000 / $288,000 | |||
75.00% | |||
Ans. 2b | Debt equity ratio = Total liabiltiies / Total stockholder's equity | ||
$216,000 / $72,000 | |||
3 times | |||
*Total stockholder's equity = Total assets - total liabilities | |||
$288,000 - $216,000 | |||
72000 | |||
Ans. 2c | Time interest earned = Earnings before interest and taxes / Interest expenses | ||
$97,500 / $15,000 | |||
6.50 | times | ||