Question

Account balances at the beginning of the year were: accounts receivable, $25,000; and inventory, $60,000. All sales were on account. Assume that Castile Products, Inc. , paid dividends of $2. 10 per share during the year. Also assume that the company’s common stock had a market price of $42 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 nearest whole number (i. E. , 0. 1234 should be entered as 12). ) 3. Dividend yield ratio. (Round your intermediate calculations to 2 decimal places. Round your percentage final answer to nearest whole number (i. E. , 0. 1234 should be entered as 12). ) 4. Price-earnings ratio. (Round your intermediate calculations to 2 decimal places. Round your answer to nearest whole number. ) 5. Book value per share. (Round your answer to 2 decimal places. )

Answer 1

The Earnings per share is $3.5;  Dividend payout ratio is 60%; Dividend yield ratio is 5% and Price-earnings ratio is 12.

Earnings per share

1. Earnings per share

Number of outstanding shares=Common stock/Par value

Number of outstanding shares=30,000/5

Number of outstanding shares=6,000

Earnings per share=Net income/Number of outstanding shares

Earnings per share=$21,000/6,000

Earnings per share=$3.5

2. Dividend payout ratio

Dividend payout ratio=Dividend per share/Earning per share

Dividend payout ratio=$2.10/$3.5

Dividend payout ratio=0.6×100

Dividend payout ratio=60%

3. Dividend yield ratio

Dividend yield ratio=Dividend per share/Market price per share

Dividend yield ratio=$2.10/$42

Dividend yield ratio=0.05×100

Dividend yield ratio=5%

4. Price-earnings ratio

Price-earnings ratio=Market price per share/Earning per share

Price-earnings ratio=$42/$3.5

Price-earnings ratio=12

Therefore the Earnings per share is $3.5;  Dividend payout ratio is 60%; Dividend yield ratio is 5% and Price-earnings ratio is 12.

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