Rossdale, Inc., had additions to retained earnings for the year just ended of $630,000. The firm paid out $105,000 in cash dividends, and it has ending total equity of $7.25 million.
| Requirement 1: |
If the company currently has 620,000 shares of common stock outstanding, what are earnings per share? Dividends per share? What is book value per share?(Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).) |
| Earnings per share | $ |
| Dividends per share | $ |
| Book value per share | $ |
| Requirement 2: |
If the stock currently sells for $29.50 per share, what is the market-to-book ratio? The price-earnings ratio? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Market-to-book ratio | times |
| Price-earnings ratio | times |
| Requirement 3: |
If total sales were $10.55 million, what is the price-sales ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Price-sales ratio | times |
Explanation:
1.
2.
3.
We need to calculate the net income before we calculate the earnings per share. The sum of dividends and addition to retained earnings must equal net income, so net income must have been: |
| Net income | = | Addition to retained earnings + Dividends |
| Net income | = | $630,000 + 105,000 |
| Net income | = | $735,000 |
| So, the earnings per share were: |
| EPS | = | Net income / Shares outstanding |
| EPS | = | $735,000 / 620,000 |
| EPS | = | $1.19 per share |
| The dividends per share were: |
| Dividends per share | = | Total dividends / Shares outstanding |
| Dividends per share | = | $105,000 / 620,000 |
| Dividends per share | = | $.17 per share |
| The book value per share was: |
| Book value per share | = | Total equity / Shares outstanding |
| Book value per share | = | $7,250,000 / 620,000 |
| Book value per share | = | $11.69 per share |
2.
| The market-to-book ratio is: |
| Market-to-book ratio | = | Share price / Book value per share |
| Market-to-book ratio | = | $29.50 / $11.69 |
| Market-to-book ratio | = | 2.52 times |
| The P/E ratio is: |
| P/E ratio | = | Share price / EPS |
| P/E ratio | = | $29.50 / $1.19 |
| P/E ratio | = | 24.88 times |
3.
| Sales per share are: |
| Sales per share | = | Total sales / Shares outstanding |
| Sales per share | = | $10,550,000 / 620,000 |
| Sales per share | = | $17.02 |
| The P/S ratio is: |
| P/S ratio | = | Share price / Sales per share |
| P/S ratio | = | $29.50 / $17.02 |
| P/S ratio | = | 1.73 times |