All categories

2 years ago

Here is the income statement for Larkspur, Inc.

Business

1 answer:

adoni [48]2 years ago

5 0

Answer:

a. The Earnings per share is $3.87

b. The Price-earnings ratio is 3.87 times

c. The Payout ratio is 12.21%

d. The Times interest earned is 10.32

Explanation:

a. The Earnings per share would be calculated as follows:

Earnings per share = (Net income – Preferred stock dividend)/Average number of common shares outstanding

We need to use the formula of the Weighted Average number of common shares outstanding to calculate the Preferred stock dividend.

Therefore, Weighted Average number of common shares outstanding = (Number of common shares outstanding in the beginning + Number of common shares outstanding in the end)/2

= (27,600 + 36,700)/2

= 32,150

Preferred stock dividend = $6,700

Therefore, Earnings per share= (131,100 – 6,700)/32,150

= 124,400/42,150

= $3.87

b. The Price-earnings ratio would be calculated as follows:

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

= $15 / $3.87 = 3.87 times

c. The Payout ratio would be calculated as follows:

Payout ratio = (Total cash dividends - Preferred stock dividends) / Net income

= ($22,700 - $6,700) / $131,000 = 12.21 %

d. Times interest earned would be calculated as follows:

Times interest earned = (Net income + Interest expense + Tax expense)/Interest expense

= (131,100 + 16,700 + 24,600)/16,700

= 10.32 times

You might be interested in

A consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $50, and shirts cost $

KiRa [710]

Answer:

This consumer should continue to maintain the current rate of consumption of purchasing three pairs of jeans and five T-shirts per year in order to continue to maximize utility since utility per dollar of the two goods are both equal to 5.

Explanation:

Under utility maximization theory for two or more goods, utility of a consumer is maximized when the ratios of marginal utility to price of each good are equal to one another. That is, utility is maximized when the utility per dollar of all the goods are equal. Any attempt by the consumer to increase or reduce the quantity of one good will not maximize his utility.

Using the pairs of jeans and T-shirts given in the question as an example, utility of the consumer is maximized when we have the following:

MUj/Pj = MUs/Ps ………………………………………………. (1)

Where;

MUj = Marginal utilities of jeans = 250

Pj = Price of jeans = $50

MUj = Marginal utilities of shirts = 150

Pj = Price of shirt = $30

Substituting the values into equation (1), we have

250/50 = 150/30

5 = 5

Since MUj/Pj = MUs/Ps is 5 = 5, it implies that the consumer is currently maximizing his utility of purchasing three pairs of jeans and five T-shirts per year. Any attempt to increase or reduce the unit of one good will not maximize his utility.

Therefore, based on the model of consumer choice, this consumer should continue to maintain the current rate of consumption of purchasing three pairs of jeans and five T-shirts per year in order to continue to maximize utility since utility per dollar of the two goods are both equal to 5.

Note

The consumer can only change increase the quantity of a good if more utility per dollar than another until when it utility diminishes to a point where its utility per dollar equal to that of the other good.

8 0

1 year ago

Blair Housewares wants to add new products to its existing line of products. Managers are correct in believing that the purpose

Zinaida [17]

Answer:

False

Explanation:

The general purpose of idea generation is to come up with the largest amount of possible ideas, it doesn't matter how crazy they might seem.

The purpose of succeeding stages will be to funnel the ideas and only work and develop the most promising ones.

3 0

2 years ago

Sony has a better opportunity to reach the potential Millennial market segment, compared to unestablished manufacturers, because

8090 [49]

Answer:

full spectrum of product offerings

Explanation:

Sony has always been striving to serve its customer better. Millennial are the top brands that are considered in market. They are the organizations which capture major market share and are massive market segment. Sony has offered wide range of products to its customers.

8 0

1 year ago

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received

muminat

Answer:

a. What is the after-tax cost if she pays the $39,000 bill in December?

= $23,000 x (1 - 32%) = $15,640

b. What is the after-tax cost if she pays the $39,000 bill in January? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

total after tax cost (including investment revenue):

= $23,000 x (1 - 37%) = $14,490

= -$23,000 x 7% x 1/12 x (1 - 37%) = -$84.53

= $14,405.47

c. Should Reese pay the $23,000 bill'in December or January?

January , since the after tax cost is lower

d. What is the after-tax cost if she expects her marginal tax rate to be 24 percent next year and pays the $23,000 bill in January?

= $23,000 x (1 - 24%) = $17,480

= -$23,000 x 7% x 1/12 x (1 - 24%) = -$101.97

= $17,378.03

e. Should Reese pay the $23,000 bill in December or January if she expects her marginal tax rate to be 32 percent this year and 24 percent next year?

December, since the after tax cost is lower

3 0

1 year ago

Suppose that Sidney runs a micro financing agency that lends money to people to start small businesses in poor countries. Sidney

NemiM [27]

Answer:

1) $9615.38

2)$9245.56

3) b is the correct option.

Explanation:

See the attached pictures for detailed answer.

5 0

2 years ago