Measures of liquidity, Solvency and Profitability The comparative financial stat
ID: 2334531 • Letter: M
Question
Measures of liquidity, Solvency and Profitability
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 62 on December 31, 20Y2.
Required:
Determine the following measures for 20Y2, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.
Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 $ 2,842,400 $ 2,417,000 Net income 624,800 495,000 Total $3,467,200 $ 2,912,000 Dividends: On preferred stock $ 8,400 $ 8,400 On common stock 61,200 61,200 Total dividends $ 69,600 $ 69,600 Retained earnings, December 31 $ 3,397,600 $ 2,842,400Explanation / Answer
Return on Common Stockholders Equity
ROCE = Net Income - Preferred Dividend / Avg. common stockholders equity
= $624800 - $8400 / $3800000
=$616400/$3800000
=16.22%
* Calculation of Avg Common stock holders Equity
= [($4677600+$4122400)/2] - [($600000+$600000)/2]
= $3,800,000
Earnings per share of common stock
EPS = Net Income - Preferred Dividend / Nos. of outstanding shares
= $616400/68000 shares
= $9.1 per share
Price Earnings Ratio
P/E Ratio = Market Value per share / EPS
= $62 / $9.06
= 6.8
Dividend per share of common stock
Dividend per share = Total Dividend / No of shares
= $61200 / 68000
= $0.9 per share
Dividend Yied
DY = Annual Dividend / Current Stock Price
= $0.9 / $62
= 1.5%