Question

The following condensed information was reported by Peabody Toys, Inc., for 2021 and 2020: ($ in thousands) 2021 2020 Income statement information Net sales $ 6,400 $ 5,400 Net income 406 148 Balance sheet information Current assets $ 920 $ 870 Property, plant, and equipment (net) 2,180 1,830 Total assets $ 3,100 $ 2,700 Current liabilities $ 1,500 $ 1,210 Long-term liabilities 870 870 Common stock 400 400 Retained earnings 330 220 Liabilities and shareholders’ equity $ 3,100 $ 2,700 Required: Determine the following ratios for 2021: (Round your percentage answers to 1 decimal place.) Determine the amount of dividends paid to shareholders during 2021. (Enter your answer in whole dollars and not in thousands.)

Answer 1

Answer:

$296 (in thousands)

Explanation:

The Dividends paid is calculated as:

Dividend paid

= Beginning Retained earnings + Net income during 2021 - Ending Retained earnings

Now,

Beginning retained earning = Retained earning at 2020 i.e $220,000

Net income during 2021 = $406,000

Ending retained earning = Retained earning of 2021 i.e $330,000

on substituting the value, we get

Dividend paid = $220,000 + $406,000 - $330,000

or

Dividend paid = $296 (in thousands)

Answer 2

Answer:

The question is incomplete, the completed question is as follows:

The following condensed information was reported by Peabody Toys, Inc., for 2021 and 2020: ($ in thousands)

2021 2020

($ in thousands)  

Income Statement    

Net sales  6400 5400

Net income 406         148    

Balance Sheet    

Current assets  920 870

Property plant and equipment(net)  2180 1830

Total Assets  3100 2700

Current liabilities  1500 1210

Long term Liabilities  870 870

Common Stock  400 400

Retained Earnings  330 220

Liabilities and Shareholders Equity 3100 2700

Required:

1. Determine the following ratios for 2021:

(1) profit margin on sales, (2) return on assets, (3) return on shareholders equity (Round your percentage answers to 1 decimal place.)

2. Determine the amount of dividends paid to shareholders during 2021. (Enter your answer in dollars.)

Profit margin on sales = 6.3%

Return on assets = 13.1%

Return on shareholders equity = 60.2%

Dividends paid =  $296, 000

Explanation:

Profit margin is the fraction of net income retained from sales revenue less operational costs. It is calculated as: Net income/ Sales * 100. The profit margin for Peabody in 2021 is: ($406, 000/ $6400000)*100 = 6.34375 %

Return on assets is the income generated by working assets. It is a profitability ratio that depicts the efficiency of management in creating value from the business assets. It is computed as: Net income/Total assets at the end of the period  * 100. The ROA for Peabody in 2021 is: ($406, 000/$3,100,000) * 100 = 13.09677%

Return on shareholder's equity is the profit generated from investments made by shareholders. This ratio can be used to compare the competitiveness of a company with that of its competitors in the industry or the industry average. It is calculated as: Net income/Average Shareholders Equity * 100. The average Shareholder's equity is calculated by adding beginning and ending balances of shareholders equity and dividing the amount by 2. The ROE for Peabody in 2021 is: ($406, 000/$675, 000)*100 = 60.14815%. $675, 000 = ($730, 000 + $620,000)/2

Dividends are tokens paid to shareholders as a result of their investment in the firm's equity. It is obtained from the resulting net income from operations. The dividends paid out by Peabody in 2021 are calculated as a balancing figure in the retained earnings account:

Opening balance: Retained Earnings   $220, 000

Net income:                                             $406, 000

Dividends paid:                                      ($296, 000)

Closing balance: Retained Earnings      $330, 000