1. Recent financial statements for Madison Company follow:

 

Madison Company

Balance Sheet

June 30

Assets

Current assets:

Cash $ 24,000

Accounts receivable, net 260,000

Merchandise inventory 380,000

Prepaid expenses 8,000

 

Total current assets 672,000

Plant and equipment, net 820,000

 

Total assets $ 1,492,000

 

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ 270,000

Bonds payable, 8% 360,000

 

Total liabilities 630,000

Stockholders' equity:

Common stock, $5 par value $ 150,000

Retained earnings 712,000

 

 

Total stockholders' equity 862,000

 

Total liabilities and stockholders' equity $ 1,492,000

 

 

Madison Company

Income Statement

For the Year Ended June 30

Sales $ 2,290,000

Cost of goods sold 1,170,000

 

Gross margin 1,120,000

Selling and administrative expenses 580,000

 

Net operating income 540,000

Interest expense 28,800

 

Net income before taxes 511,200

Income taxes 153,360

 

Net income $ 357,840

 

 

Account balances at the beginning of the company's fiscal year were: accounts receivable, $190,000; and inventory, $280,000. All sales were on account.

 

Assume that Madison Company paid dividends of $3.35 per share during the year. Also assume that the company's common stock had a market price of $73.00 per share on June 30 and that there was no change in the number of outstanding shares of common stock during the fiscal year.

 

Required:

Compute the following:

 

1.

Earnings per share. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

 

Earnings per share $

 

2.

Dividend payout ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.Omit the "%" sign in your response.)

 

Dividend payout ratio %

 

3. Dividend yield ratio. (Round your answer to 1 decimal place.Omit the "%" sign in your response.)

 

Dividend yield ratio %

 

4.

Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)

 

Price-earnings ratio

 

 

 

2. Comparative financial statements for Heritage Antiquing Services for the fiscal year ending December 31 appear on the following page. The company did not issue any new common or preferred stock during the year. A total of 700 thousand shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.75. The market value of the company's common stock at the end of the year was $21. All of the company's sales are on account.

 

Heritage Antiquing Services

Comparative Balance Sheet

(dollars in thousands)

This Year Last Year

Assets

Current assets:

Cash $ 1,100 $ 1,350

Accounts receivable, net 10,600 7,700

Inventory 12,100 11,400

Prepaid expenses 780 650

 

Total current assets 24,580 21,100

 

Property and equipment:

Land 10,700 10,700

Buildings and equipment, net 45,844 40,767

 

Total property and equipment 56,544 51,467

 

Total assets $ 81,124 $ 72,567

 

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 19,000 $ 18,400

Accrued payables 1,080 870

Notes payable, short term 160 160

 

Total current liabilities 20,240 19,430

Long-term liabilities:

Bonds payable 9,300 9,300

 

Total liabilities 29,540 28,730

 

Stockholders' equity:

Preferred stock 1,000 1,000

Common stock 700 700

Additional paid-in capital 4,000 4,000

 

Total paid-in capital 5,700 5,700

Retained earnings 45,884 38,137

 

Total stockholders' equity 51,584 43,837

 

Total liabilities and stockholders' equity $ 81,124 $ 72,567

 

 

Heritage Antiquing Services

Comparative Income Statement and Reconciliation

(dollars in thousands)

This Year Last Year

Sales $ 74,000 $ 66,000

Cost of goods sold 41,000 34,000

 

Gross margin 33,000 32,000

 

Selling and administrative expenses:

Selling expenses 11,300 10,500

Administrative expenses 6,900 6,900

 

Total selling and administrative expenses 18,200 17,400

 

Net operating income 14,800 14,600

Interest expense 930 930

 

Net income before taxes 13,870 13,670

Income taxes 5,548 5,468

 

Net income 8,322 8,202

Dividends to preferred stockholders 50 380

 

Net income remaining for common stockholders 8,272 7,822

Dividends to common stockholders 525 525

 

Net income added to retained earnings 7,747 7,297

Retained earnings, beginning of year 38,137 30,840

 

Retained earnings, end of year $ 45,884 $ 38,137

 

 

Required:

Compute the following financial ratios for common stockholders for this year:

 

1.

Gross margin percentage. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

 

Gross margin percentage %

 

2.

Earnings per share of common stock. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

 

Earnings $ per share

 

3.

Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)

 

Price-earnings ratio

 

4.

Dividend payout ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place. Omit the "%" sign in your response.)

 

Dividend payout ratio %

 

5.

Dividend yield ratio. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

 

Dividend yield ratio %

 

6.

Return on total assets. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

 

Return on total assets %

 

7.

Return on common stockholders' equity. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

 

Return on common stockholders' equity %

 

8.

Book value per share. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

 

Book value

$ per share