Matthias Medical manufactures hospital beds and other institutional furniture. T
ID: 2416179 • Letter: M
Question
Matthias Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income statement for 2012 and 2013 follow. Matthias Medical Comparative Balance Sheet As of December 31 2013 2012 Assets Current assets Cash $400,000 $417,500 Accounts receivable, net 1,067,100 776,500 Inventory 731,000 681,100 Other current assets 369,000 247,000 Total current assets 2,567,100 2,122,100 Property, plant, & equipment, net 9,434,940 8,431,615 Total assets $12,002,040 $10,553,715 Liabilities and Stockholders’ Equity Current liabilities $3,196,000 $2,846,050 Long-term debt 3,702,700 3,892,700 Total liabilities 6,898,700 6,738,750 Preferred stock, $5 par value 59,900 59,900 Common stock, $0.25 par value 124,000 103,900 Retained earnings 4,919,440 3,651,165 Total stockholders’ equity 5,103,340 3,814,965 Total liabilities and stockholders’ equity $12,002,040 $10,553,715 Matthias Medical Comparative Income Statement and Statement of Retained Earnings For the Year 2013 2012 Sales revenue (all on account) $10,880,000 $9,613,900 Cost of goods sold 5,191,000 5,298,750 Gross profit 5,689,000 4,315,150 Operating expenses 2,840,250 2,634,100 Net operating income 2,848,750 1,681,050 Interest expense 379,000 308,600 Net income before taxes 2,469,750 1,372,450 Income taxes (30%) 740,925 411,735 Net income $1,728,825 $960,715 Dividends paid Preferred dividends 29,550 29,550 Common dividends 431,000 441,000 Total dividends paid 460,550 470,550 Net income retained 1,268,275 490,165 Retained earnings, beginning of year 3,651,165 3,161,000 Retained earnings, end of year $4,919,440 $3,651,165 Calculate the earnings per share (average of 491,000 shares outstanding for the year) for 2013. (Round answer to 2 decimal places, e.g. 2.55.) Earning per share $ per share Calculate the price/earnings ratio (market price of $45 at year-end) for 2013. (Round answer to 2 decimal places, e.g. 2.55.) Price/earnings ratio Calculate the dividend payout ratio (dividends of $1.04 per common share for the year) for 2013. (Round answer to 2 decimal places, e.g. 2.55%.) Dividend payout ratio %
Explanation / Answer
Earnings per share = Earnings attributable to equity shareholders / Weighted Average No. of equity shares
= (Net Income - Preference Dividends) / [(Equity shares in the beg. + Equity shares in the end) / 2]
= (1728825 - 29550) / [(124000 + 103900) / 2]
= $14.91
Market Price per share = (Total Assets - Total Laibilities - Preference share capital) / Weighted average no. of equity shares
= (12002040 - 6898700 - 299500) / [(124000 + 103900) / 2]
= $42.16
Price earnings ratio = Market Price per share / EPS
= 42.16 / 14.91
= 2.83 times
Dividend payout ratio = Equity Dividends / Net Income to equity shareholders x 100
= 431000 / (1728825 - 29550) x 100
= 25.36%