Question

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash	$	24,000
Accounts receivable, net		170,000
Merchandise inventory		340,000
Prepaid expenses		12,000
Total current assets		546,000
Property and equipment, net		840,000
Total assets	$	1,386,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	200,000
Bonds payable, 11%		350,000
Total liabilities		550,000
Stockholders’ equity:
Common stock, $10 par value	$	130,000
Retained earnings		706,000
Total stockholders’ equity		836,000
Total liabilities and stockholders’ equity	$	1,386,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	2,210,000
Cost of goods sold		1,200,000
Gross margin		1,010,000
Selling and administrative expenses		580,000
Net operating income		430,000
Interest expense		38,500
Net income before taxes		391,500
Income taxes (30%)		117,450
Net income	$	274,050

Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $330,000. All sales were on account.

Assume that Castile Products, Inc., paid dividends of $2.25 per share during the year. Also assume that the company’s common stock had a market price of $60 at the end of the year and there was no change in the number of outstanding shares of common stock during the year.

Required:

Compute financial ratios as follows:

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

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

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

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

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

Answer 1

1)
	Calculation Of Earning Per Share
	No Of Shares Outstanding = $130000/ $10 per share
			=13000 Shares
	Earning Per Share = Net Income / No Of Share Outstanding
		=$274050 /13000 Shares
		=$21.08 per share
2)	Dividend Payout Ratio
	=Dividend Per Share/ Earanig Per Share
	=$2.25/21.08
	10.32%
3)	Dividend yield ratio
	=Dividend Per Share / Market Price Per Share
	=$2.25/60
	3.75%
4)	Price Earning Ratio
	= Market Price / Earning Per Share
	=$60/21.08
	2.85
5)	Book value per share
	= Shareholders Equity / No of shares
	=$836000/13000
	$          64.31
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