Question

XYZ Ltd is attempting to calculate some of their ratios for their most recent fiscal year. The following information is available: 1. a. Net income after tax b. Interest payments c. Lease payments d. Preferred Share dividends $16,300 e. Common share dividends $12,704 f. Principal repayments g. Common shares outstanding 31,760 h. Tax rate $74,100 $22,000 $33,000 $20,400 22% Calculate 1) the earnings per common share, 2) dividends per common share ,3) retained earnings, and 4) times interest earned ratio

Answer 1

(1)-Earnings per share on common share

Earnings per share on common share = Net income available to common shareholders / Number of common shares outstanding

= [Net income after tax – preferred dividends] / Number of common shares outstanding

= [$74,100 - $16,300] / 31,760 Shares

= $57,800 / 31,760 Shares

= $1.82 per share

(2)-Dividend per common share

Dividend per common share = Total common shares dividends / Number of common shares outstanding

= $12,704 / 31,760 Shares

= $0.40 per share

(3)-Retained Earnings

Retained Earnings = Net income after tax – Common dividends – Preferred dividends

= $74,100 - $12,704 - $16,300

= $45,096

(4)-Times Interest Earned Ratio

Times Interest Earned Ratio = [Net Income before tax + Interest expenses] / Interest expenses

= [{$74,100/(1 – 0.22)} + $22,000] / $22,000

= [{$74,100/0.78} + $22,000] / $22,000

= [$95,000 + $22,000] / $22,000

= $117,000 / $22,000

= 5.32 Times