Answer and Explanation:
The formula and the computations are shown below:
(a) Earnings per share = ( Net Income - Preference stock dividend) ÷ (Weighted average number of outstanding shares
)
= ($159,200 - $4,900) ÷ (22,400 shares + 37,300 shares) ÷ 2
= $154,300 ÷ 29,850 shares
= $5.169
= $5.17
(b) Price earnings ratio = Price ÷ Earning per share
= $13 ÷ $5.17
= 2.51 Times
(c) Payout ratio = Dividend paid to equity share holders ÷ net income
= ($22,600 - $4,900 ) ÷ ($159,200)
= $17,700 ÷ $159,200
= 11.118 %
= 11.12%
(d) Times interest earned = Earnings before interest and tax ÷ Interest expense
= ($159,200 + $11,700 + 29,700) ÷ ($11,700
)
= 17.145
= 17.15 Times
We simply applied the above formulas to determine the each ratios
