ACCT 002 Lecture Notes - Lecture 20: Gross Margin, Current Liability, Accounts Receivable

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blackpig616

19 Aug 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 002

Professor

cooper

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Document Summary

Common stockholders focus on ratios that indicate profitability and dividends payout: earnings per share, gross margin percentage, price-earnings ratio, dividend payout ratio, dividend yield ratio, return on total assets, return on common stockholders" equity, book value per share. Earnings per share (eps) refers to the earnings that are available to the owners of common stock after preferred dividends have been paid. To compute molin company"s eps, first determine the average common shares that were outstanding during the year. To do this, we examine how many shares were outstanding at the beginning of the year and at the end of the year. In this case, this can be determined by looking at the balance sheets. The relation between the market price of a share of stock and the stock"s current earnings per share is often stated in terms of a price-earnings ratio.

Related Questions

Problem 2-18 Price-earnings ratio [LO2]

Botox Facial Care had earnings after taxes of $280,000 in 2009 with200,000 shares of stock outstanding. The stock price was $30.80. In2010, earnings after taxes increased to $320,000 with the same200,000 shares outstanding. The stock price was $40.00.

(a)	Compute earnings per share and the P/E ratio for 2009. The P/Eratio equals the stock price divided by earnings per share.(Enter only numeric values. Round intermediate calculations and EPSanswer to 2 decimal places. Omit the "$" sign in yourresponse.)

	2009
Earnings per share	$
P/E ratio

(b)	Compute earnings per share and the P/E ratio for 2010. (Enter only numericvalues. Round intermediatecalculations and EPS answer to 2decimal places. Omit the "$" sign in your response.)

	2010
Earnings per share	$
P/E ratio

(c)	Give a general explanation of why the P/E ratio changed. (Round yourintermediate calculations and final answers to 2 decimalplaces. Omit the "%" sign inyour response.)

The stock price (Click to select)decreasedincreased by% while EPS only (Click to select)decreasedincreased %.

Problem 2-17 Earnings per share and retained earnings [LO1, 3]

Quantum Technology had $640,000 of retained earnings on December31, 2010. The company paid common dividends of $30,000 in 2010 andhad retained earnings of $500,000 on December 31, 2009.

(a)	How much did Quantum Technology earn during 2010? (Omit the "$" sign in your response.)

Earnings available to common stockholders

(b)	What would earnings per share be if 40,000 shares of common stockwere outstanding? (Roundyour answer to 2 decimal places. Omit the "$" sign in your response.)

Earnings per share

amethystsheep348

The following information has been gathered for MaletteManufacturing:

Net income	$5,000,000
Interest expense	400,000
Average total assets	60,000,000
Preferred dividends	400,000
Common dividends	$1,200,000
Average common shares outstanding	800,000 shares
Average common stockholders' equity	$20,000,000
Market price per common share	$40

Assume that the firm has no common stock equivalents. The taxrate is 34%.

Required:

1. Compute the return on assets. Round youranswer to three decimal places.

2. Compute the return on common stockholders'equity. Round your answer to two decimal places.

3. Compute the earnings per share. Round youranswer to two decimal places.
$ per share

4. Compute the price-earnings ratio. Round youranswer to two decimal places.

5. Compute the dividend yield. Round youranswer to four decimal places.

6. Compute the dividend payout ratio. Roundyour answer to two decimal places.

carminescorpion86

Earnings per Share, Price-Earnings Ratio, Dividend Yield

The following information was taken from the financialstatements of Tolbert Inc. for December 31 of the current fiscalyear:

Common stock, $10 par value (no change during the year)	$2,300,000
Preferred $10 stock, $200 par (no change during the year)	6,000,000

The net income was $760,000 and the declared dividends on thecommon stock were $57,500 for the current year. The market price ofthe common stock is $14.00 per share.

For the common stock, determine (a) the earnings per share, (b)the price-earnings ratio, (c) the dividends per share, and (d) thedividend yield. If required, round your answers to two decimalplaces.

a. Earnings per Share	$
b. Price-Earnings Ratio
c. Dividends per Share	$
d. Dividend Yield		%

mauvesardine68

ACCT 002 Lecture Notes - Lecture 20: Gross Margin, Current Liability, Accounts Receivable

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