Question

Question 6 / 1 View Policies Current Attempt in Progress Here is the income statement for Windsor, Inc. WINDSOR, INC. Income Statement For the Year Ended December 31, 2022 Sales revenue $420,100 Cost of goods sold 235,100 Gross profit 185,000 Expenses (including $16,100 interest and $21,900 income taxes) 72,500 Net income $ 112,500 Additional information: 1. Common stock outstanding January 1, 2022, was 22,400 shares, and 36,600 shares were outstanding at December 31, 2022. 2. The market price of Windsor stock was $12 in 2022. 3. Cash dividends of $22,600 were paid, $4,600 of which were to preferred stockholders.

Answer 1

a)
Weighted Average number of common shares outstanding = (Number of common shares outstanding in the beginning + Number of common shares outstanding in the end)/2
= (22,400 + 36,600)/2
= 29,500
Earnings per share = (Net income – Preferred stock dividend)/Weighted Average number of common shares outstanding
= (112,500 – 4,600)/29,500
= 107,900/29,500
= $3.66

b)
Price earnings ratio = Market price of 1 common share/Earnings per share
= 12/3.66
= 3.28 times

c)
Payout ratio = Cash dividends/Net income
= 22,600/112,500
= 20.09%

d)
Times interest earned = (Net income + Interest expense + Tax expense)/Interest expense
= (112,500 + 16,100 + 21,900)/16,100
= 150,500/16,100
= 9.35 times

(a) Earning per share	$3.66
(b) Price earning ratio	3.28 times
(c) Payout ratio	20.09%
(d) Time Interest earned	9.35 times

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