Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 910,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company’s common stock at the end of the year was $23.50. All of the company’s sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	1,506		$	1,720
Accounts receivable, net		15,500			10,300
Inventory		10,250			8,640
Prepaid expenses		1,910			2,320
Total current assets		29,166			22,980
Property and equipment:
Land		7,100			7,100
Buildings and equipment, net		20,300			20,100
Total property and equipment		27,400			27,200
Total assets	$	56,566		$	50,180
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	10,600		$	8,850
Accrued liabilities		820			1,250
Notes payable, short term		410			410
Total current liabilities		11,830			10,510
Long-term liabilities:
Bonds payable		6,250			6,250
Total liabilities		18,080			16,760
Stockholders' equity:
Common stock		910			910
Additional paid-in capital		4,750			4,750
Total paid-in capital		5,660			5,660
Retained earnings		32,826			27,760
Total stockholders' equity		38,486			33,420
Total liabilities and stockholders' equity	$	56,566		$	50,180

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	90,000		$	85,000
Cost of goods sold		57,500			53,500
Gross margin		32,500			31,500
Selling and administrative expenses:
Selling expenses		9,600			9,100
Administrative expenses		13,100			12,100
Total selling and administrative expenses		22,700			21,200
Net operating income		9,800			10,300
Interest expense		750			750
Net income before taxes		9,050			9,550
Income taxes		3,620			3,820
Net income		5,430			5,730
Dividends to common stockholders		364			728
Net income added to retained earnings		5,066			5,002
Beginning retained earnings		27,760			22,758
Ending retained earnings	$	32,826		$	27,760

Required:

Compute the following financial data for this year:

1. Earnings per share. (Round your answer to 2 decimal places.)

2. Price-earnings ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

3. Dividend payout ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

4. Dividend yield ratio. (Round your answer to 2 decimal places.)

5. Book value per share. (Round your answer to 2 decimal places.)

Answer 1

1.	Earnings per share = ( Net income - Preferred dividend ) / Outstanding shares of common stock = ( 5430000 - 0 ) / 910000	5.97
2.	Price-earnings ratio = Market price per share / Earnings per share = 23.50 / 5.97	3.94
3.	Dividend payout ratio = Dividend per share / Earnings per share = 0.40 / 5.97	6.70%
4.	Dividend yield ratio = Dividend per share / Market price per share = 0.40 / 23.50	1.70%
5.	Book value per share = ( Total stockholder's equity - Preferred equity ) / Outstanding shares of common stock = ( 38486000 - 0 ) / 910000	42.29