Question

Markus Company's common stock sold for $3.50 per share at the end of this year. The company paid a common stock dividend of $0.63 per share this year. It also provided the following data excerpts from this year's financial statements Ending Beginning Balance Balance $ 35,000 $ 34,000 $ 70,000 55,000 $60,700 $ 70,000 $ 165,700 159,000 557000 $586,800 $ 67,500 $ 55,500 152,000 $ 136,800 $ 133,000 $ 133,000 $405,000 $450,000 Total liabilities and stockholders' equity $ 557,000 $586,800 Cash Accounts receivable Inventory Current assets lotal assets Current liabilities Total liabilities Common stock, $1 par value Total stockholders' equity This Year Sales (all on account) 825,000 478,500 346,500 Net operating income $ 194,250 $ 10,500 $ 128,625 Cost of goods sold Gross margin Interest expense Net income

Answer 1

Answers

• Requirement 1

A	Net Income	$128,625
B	Average Common Stock shares	$133,000
C = A/B	Earnings per share	$0.97

• Requirement 2

A	Price per share	$3.50
B	Earnings per share	$0.97
C = A/B	Price earnings ratio	3.62

• Requirement 3

A	Dividend per share	$0.63
B	Earnings per share	$0.97
C = (A/B) x 100	Dividend payout ratio	65%
A	Dividend per share	$0.63
B	Price per share	$3.50
C = (A/B) x 100	Dividend Yield ratio	18%

• Requirement 4

A	Net Operating Income	$194,250
B	Beginning balance - Total Assets	$586,800
C	Ending balance - Total Assets	$557,000
D = (B+C)/2	Average Total Assets	$571,900
E = A/D	Return on Total Assets	34.0%

NOTE: If Return is to be calculated on ‘total assets’ rather than ‘average total assets’, the answer would be 34.9%