Question

please help

Eh 17-3 Exercises and Problems Five Measures of Solvency or Profitability The balance sheet for Garcon Inc. at the end of the current fiscal year indicated the following: Bonds payable, 8% $1,000,000 Preferred $10 stock, $100 par 214,000 Common stock, $7 par 179,760.00 Income before income tax was $328,000, and income taxes were $49,800 for the current year. Cash dividends paid on common stock during the current year totaled $64,200. The common stock was selling for $100 per share at the end of the year. Determine each of the following. Round answers to one decimal place, except for dollar amounts which should be rounded to the nearest whole cent. Use the rounded answers for subsequent requirements, if required. a. Times interest earned ratio times b. Earnings per share on common stock c. Price-earnings ratio d. Dividends per share of common stock e. Dividend yield

Answer 1

a) Times Interest earned Ratio = 5.1

b) Earnings per share on common stock = $10.00

c) Price Earnings ratio = 10

d) Dividends per share of common stock = $2.50

e) Dividend yield = 2.5%

Explanations:

Interest Expense 1000000 x 8% 80000 Times Interest earned Ratio 328000 + 80000 80000 408000 80000 5.1 Earnings per share on common stock Net Income before income taxes - income taxes - Preferred dividends No. of common shares outstanding 328000 - 49800 - 21400 25680 256800 25680 $10.00

Price Earnings ratio Share price EPS 100 Dividends per share of common stock = Dividends on common stock No. of common shares outstanding 64200 25680 $2.50 Dividend yield Dividend per share Share price 2.5 100 2.5%

*No of common shares outstanding = 179760 / 7 = 25680

*Dividends on preferred stock = 214000 / 100 x 10 = 21400