Question

DUUR Calculator Five Measures of Solvency or Profitability The balance sheet for Quigg Inc. at the end of the current fiscal year indicated the following: Bonds payable, 6% $1,700,000 Preferred $10 stock, $50 par 42,000 Common stock, $13 par 84,630 Income before income tax expense was $163,200,and income taxes were $24,600 for the current year. Cash dividends paid on common stock during the current year totaled $50,127. The common stock was selling for $220 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 < Previous Check My Work Save and Et Submit Assignment for Grading

Answer 1

Income before income tax expenses is $163,200

Tax expenses is $24,600

Cash dividend on common stock is $50,127

Selling price of common stock is $220 per share.

A) Times interest earned ratio (TIER)= Earning before interest and taxes/ interest expenses

Interest expenses = 6% bond payable of $ 1,700,000

=1700000×6%

Interest expenses=1700000×6/100= $102000

=TIER= $163,200/$102000

Tier=1.6 times

B) Earning per share on common stock

Earning per share=

• EPS = (net income - preferred dividends) ÷ outstanding common shares

Preferred dividend= nil ( assuming no dividend for preferred stock because percentage of stock not given )

Net income= gross income - tax expense

= $163200-$24600

=$138600

EPS= Net income / outstanding common shares.

Outstanding number of shares = 84630/220=385 shares

=$138600/385 = 360

=$360.

C) Price earning ratio

P/E ratio = Current price of shares/Earning per share

= $220/360=0.61

P/E ratio = 0.61

D) Dividend per share of common stock

Dividend per share= Declared dividend/ number of outstanding common shares

DPS= $50127/385

DPS=$130.2

E) Dividend yield

Dividend Yield = Cash Dividend per share / Market Price per share * 100

dividend yield = 130.2/220× 100

=59.18%.

Thank you.