Question

The comparative financial statements for Prince Company are below:

	Year 2				Year 1
Income statement:
Sales revenue	$	194,000			$	168,000
Cost of goods sold		113,000				100,400
Gross profit		81,000				67,600
Operating expenses and interest expense		56,400				53,200
Pretax income		24,600				14,400
Income tax		8,400				4,200
Net income	$	16,200			$	10,200
Balance sheet:
Cash	$	4,400			$	7,200
Accounts receivable (net)		14,200				18,200
Inventory		40,400				34,200
Property and equipment (net)		45,600				38,400
Total assets	$	104,600			$	98,000
Current liabilities (no interest)	$	16,200			$	17,200
Long-term liabilities (10% interest)		45,200				45,200
Common stock ($5 par value, 6,080 shares outstanding)		30,400				30,400
Retained earnings		12,800				5,200
Total liabilities and stockholders' equity	$	104,600			$	98,000

Assume that the stock price per share is $30 and that dividends in the amount of $4.50 per share were paid during Year 2. Compute the following ratios: (Round your answers to 2 decimal places

Earnings per share, Current ratio, Quick ratio, cash ratio, price/earnings ratio, dividend yield ratio %

Answer 1

Answer
1	Calculation of Earnings per share
	net income / number of shares outstanding
	$ 16,200 / 6080
	EPS = 2.66
2	Calculation of current ratio
	current asset / current liabilities
	(4400 + 14200 + 40400) / 16200
	current ratio = 3.64
3	Calculation of quick ratio
	( cash + accounts receivable) / current liabilities
	(4400 + 14200) / 16200
	quick ratio = 1.15
4	Calculation of Cash ratio
	cash / current liabilities
	4400 / 16200
	Cash Ratio = 0.27
5	Calculation of P/E ratio
	Market Price per Share / Earning Per Share
	30 / 2.66
	P/E Ratio = 11.28
6	Calculation of Dividend yield ratio
	Dividend per share / market price per share
	4.5 / 30
	Dividend yield ratio = 15%