Answer:
Weller Corporation
Computation of the financial data for this year:
A. Earnings per share = Net Income/No. of outstanding shares
= $3,540,000/800,000
= $4.43
B. Price-earnings ratio = Market value of share / Earnings per share
= $18/$4.43
= 4.06 times
C. Dividend Payout Ratio = Dividend per share/Earnings per share
= $0.40/$4.43
= 0.09 = 9%
D. Dividend yield ratio = Dividend per share/Market price per share
= $0.40/$18
= 0.02 = 2%
E. Book value per share = Common Equity / No. of outstanding shares
= $34,880,000/800,000
= $43.60
Explanation:
a) Data and Calculations:
1. Weller Corporation Comparative Balance Sheet
(dollars in thousands)
This Year Last Year
Assets
Current assets:
Cash $ 1,280 $ 1,560
Accounts receivable, net 12,300 9,100
Inventory 9,700 8,200
Prepaid expenses 1,800 2,100
Total current assets 25,080 20,960
Long-term assets:
Property and equipment:
Land 6,000 6,000
Buildings and equipment, net 19,200 19,000
Total property and equipment 25,200 25,000
Total assets $ 50,280 $ 45,960
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 9,500 $ 8,300
Accrued liabilities 600 700
Notes payable, short term 300 300
Total current liabilities 10,400 9,300
Long-term liabilities:
Bonds payable 5,000 5,000
Total liabilities 15,400 14,300
Stockholders' equity:
Common stock 800 800
Additional paid-in capital 4,200 4,200
Total paid-in capital 5,000 5,000
Retained earnings 29,880 26,660
Total stockholders' equity 34,880 31,660
Total liabilities and
stockholders' equity $ 50,280 $ 45,960
2. Weller Corporation Comparative Income Statement
and Reconciliation (dollars in thousands)
This Year Last Year
Sales $ 79,000 $ 74,000
Cost of goods sold 52,000 48,000
Gross margin 27,000 26,000
Selling and administrative expenses:
Selling expenses 8,500 8,000
Administrative expenses 12,000 11,000
Total selling and administrative
expenses 20,500 19,000
Net operating income 6,500 7,000
Interest expense 600 600
Net income before taxes 5,900 6,400
Income taxes 2,360 2,560
Net income 3,540 3,840
Dividends to common stockholders 320 600
Net income added to retained
earnings 3,220 3,240
Beginning retained earnings 26,660 23,420
Ending retained earnings $ 29,880 $ 26,660
3. Other information:
a. Common stock, outstanding 800,000 shares
b. Interest rate on the bonds =12%.
c. Income tax rate was 40%
d. Dividend per share of common stock was $0.40
e. Market value of the company’s common stock at the end of the year was $18.
