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Alex73 [517]
2 years ago
12

The Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares. Preferred dividends total $12,0

00. On the most recent trading day, the preferred shares sold at $50 and the common shares sold at $95. What is this company's current price-earnings ratio?
Business
1 answer:
AlexFokin [52]2 years ago
7 0

Answer:

Price earnings ratio = 19 times.

Explanation:

Price earning ratio is calculated as for the common equity, as the earnings on preference share is fixed.

Accordingly, the earnings for equity = Net income - preference dividend = $112,000 - $12,000 = $100,000

Number of shares outstanding = 20,000

Earnings per share = $100,000/20,000 = $5 per share.

Selling price of the share = $95

Thus, price earnings ratio = $95/$5 = 19 times.

This reflects that the 19 times of earnings is the price of share.

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During 2019 the Barker Company had a net income of $75,000. Below is information taken from Barker’s last two balance sheets: 20
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Answer:

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Explanation:

net income  75,000

Adjustment (A)

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<u>Notes:</u>

(A)

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the gain on land is not a monetary term. We will record the proceeds in cash for the sale under investment activities, not operating as the business is not selling land every year.

depreciation is an accounting metric, is not an actual expense, it doesn't involve cash.

(B)

the increasein the Ar means more sales were not collected therefore, less cash collected.

(C)

the decrease in the long term AR  represent the collection, so it increases the cash

(D)

the increase in account payable represent the delay of payment, so company has more cash available.

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