Here is the income statement for Belding, Inc. BELDING Inc. Income statement for
ID: 2381278 • Letter: H
Question
Here is the income statement for Belding, Inc. BELDING Inc. Income statement for the year ended December 31, 2012 Sales $400,000 costs of goods sold 250,000 gross profit 150,000 expenses ( including $12,000 interest and $22,000 income taxes) 100,000 net income 50,000 Additional info.: 1. Common stock outstanding January 1, 2012, was 30,000 shares, and 40,000 shares were outstanding at december 31, 2012. 2. The market price of Belding, Inc. stock was $15.20 in 2013. 3. Cash dividends of $16,000 we paid, $4,500 of which were preferred stockholders. Intructions: Compute the following measures for 2012. a. earnings per share b. price earnings ratio. c. payout ratio d. times interest earned ratio
Explanation / Answer
(a) Earnings per share
(Net Income - Preferred stock dividends) / Average common shares outstanding
($50000 - 4,500) / (30000 + 40,000) / 2 = $1.29
(b) Price-earnings ratio
$15.20/ 1.29 = 11.78 times
(c) Payout ratio
($16000 - 4,500) / 50000 = 23%
(d) Times interest earned ratio
Earnings before Interest and Tax / Interest expenses
50000+ 12000 + 22000) / 12000 = 7 times