Answer:
a) Earning per share $3.66
b) Price earning ratio 3.28 times
c) Payout ratio 20.09%
d) Time Interest earned 9.35 times
Explanation:
A) Calculation for Earnings per share
First step is to calculate the Weighted Average number of common shares outstanding using this formula.
Weighted Average number of common shares outstanding = (Number of common shares outstanding in the beginning + Number of common shares outstanding in the end)/2
Let plug in the formula
Weighted Average number of common shares outstanding= (22,400 + 36,600)/2
Weighted Average number of common shares outstanding= 29,500
Now let calculate the Earnings per share using this formula
Earnings per share = (Net income – Preferred stock dividend)/Weighted Average number of common shares outstanding
Let plug in the formula
Earnings per share= (112,500 – 4,600)/29,500
Earnings per share= 107,900/29,500
Earnings per share= $3.66
B) Calculation for Price-earnings ratio enter price-earnings ratio in times
Using this formula
Price earnings ratio = Market price of 1 common share/Earnings per share
Let plug in the formula
Price earnings ratio= 12/3.66
Price earnings ratio= 3.28 times
C) Calculation for Payout ratio enter payout ratio in percentages using this formula
Payout ratio = Cash dividends/Net income
Let plug in the formula
Payout ratio= 22,600/112,500
Payout ratio= 20.09%
D) Calculation for Times interest earned enter times interest earned using this formula
Times interest earned = (Net income + Interest expense + Tax expense)/Interest expense
Let plug in the formula
Times interest earned= (112,500 + 16,100 + 21,900)/16,100
Times interest earned= 150,500/16,100
Times interest earned= 9.35 times
Therefore:
a) Earning per share $3.66
b) Price earning ratio 3.28 times
c) Payout ratio 20.09%
d) Time Interest earned 9.35 times
