In: Finance
You are given the following information for Smashville, Inc.
Cost of goods sold: | $ | 119,000 | |
Investment income: | $ | 2,300 | |
Net sales: | $ | 232,000 | |
Operating expense: | $ | 40,000 | |
Interest expense: | $ | 7,400 | |
Dividends: | $ | 11,000 | |
Tax rate: | 40 | % | |
Current liabilities: | $ | 18,000 |
Cash: | $ | 21,000 |
Long-term debt: | $ | 25,000 |
Other assets: | $ | 39,000 |
Fixed assets: | $ | 126,000 |
Other liabilities: | $ | 5,000 |
Investments: | $ | 43,000 |
Operating assets: | $ | 45,000 |
During the year, Smashville, Inc., had 17,000 shares of stock outstanding and depreciation expense of $15,000. At the end of the year, Smashville stock sold for $52 per share. Calculate the price-book ratio, price-earnings ratio, and the price-cash flow ratio.
Income Statement
Sales | 232,000.00 | |
Add: Investment cost | 2,300.00 | |
Gross income | 234,300.00 | |
Less: | Cost of goods sold | 119,000.00 |
Less: | operating expenses | 40,000.00 |
Depreciation | 15,000.00 | |
EBIT | 60,300.00 | |
Less: | Interest | 7,400.00 |
Income Before Income Tax (EBT) | 52,900.00 | |
Less: Income Tax@40% | 21,160.00 | |
Net Profit After Tax | 31,740.00 | |
Less: Dividend | 11,000.00 | |
Added to retained earnings | 20,740.00 |
Book Value per Share = (Total Assets – Total Liabilities) / Number of shares outstanding
= (21000+39000+126000+43000+45000-(18000+25000+5000))/17000
= (226000/17000
= 13.29
price-book (P/B) Ratio = market price per share / book value per share
= 52/13.29
= 3.91
Earnings per share (EPS) = Net profit after tax/Number of shares outstanding
= 31740/17000
= 1.87
price-earnings ratio = market price per share /EPS
= 52/1.87
= 27.81 (if you do not rounded off EPS, answer comes to 27.85)
OPerating cash flow = Net income+non cash expenses-increase in working capital-other income
= 31740-2300+1500
= 30940
OPerating cash flow per share = 30940/17000
= 1.82
price-cash flow ratio =market price per share /OPerating cash flow per share
= 52/1.82
= 28.57