Question

Hi, I need help with parts h-m.

How do I get the values for h-m??

I have the formulas but Ihave no idea how to get those values.

For ex: How do we calculate market price per share? earnings per share? Given what we have...

Thank you!

17-2 Financial Ratios The annual reports of Milano Italian clothing chain, included the following selected data (in millions, " is the European euro) 20X2 20x1 20x0 Annual amounts: Net income € 29 Gross margin on sales 250 Cost of goods sold Operating expenses Income tax expense Dividends declared and paid End-of-year amounts: Long-term assets Long-term debt Current liabilities Cash Accounts receivable Merchandise inventory Paid-in capital I 205 Retained income 110 During each of the three years, 10 million shares of common stock were outstanding. Assume that all sales were on account and that the applicable market prices per share of stock were € 92 for 20X1 and € 118 for 20X2. 1. Compute each of the following for each of the last two years, 20X1 and 20X2: a) Rate of return on sales b) Rate of return on stockholders' equity c) Current ratio d) Ratio of total debt to stockholders' equity e) Ratio of current debt to stockholders' equity f) Gross profit rate g) Average collection period for accounts receivable h) P/E ratio i) Dividend-payout percentage j) Dividend yield k) Total debt to equity 1) Earnings per share m)Price earnings

I would appreciate if you can break the formulas down even further so I know what numbers to use (h-m)

Answer 1

Answer:

(Amounts in million)

Earning per share = Net Income / No. of outstanding shares

20X2 = 95 / 10 = 9.5 20X1 = 65/10 = 6.5

h.P/E Ratio = Market Price per share / Earning per share

20X2 = 118 / 9.5 = 12.42 ; 20X1 = 92 / 6.5 = 14.15

i.Dividend payout percentage = Dividend paid / Net Income

20X2 = 39 / 95 = 41.05% ; 20X1 = 16 / 65 = 24.62%

j.Dividend Yield = Dividend per share / Market Price

Dividend per share = Dividend paid / No. of outstanding shares

20X2 = 39 / 10 = 3.9 ; 20X1 = 16 / 10 = 1.6

Dividend Yield 20X2 = 3.9 / 118 = 3.31% ; Dividend Yield 20X1 = 1.6 / 92 = 1.74%

k.Total Debt to Equity = Total Liabilities / Total Equity

20X2 = ( 79 + 69 ) / ( 211 + 110 ) = 148 / 321 = 0.46

20X1 = ( 62 + 50 ) / ( 209 + 55 ) = 112 / 264 = 0.42

l.Earning per share = Net Income / No. of outstanding shares

20X2 = 95 / 10 = 9.5 20X1 = 65/10 = 6.5