Six Financial Ratios The balance sheet for Bearing Industries, Inc. at the end o
ID: 2427477 • Letter: S
Question
Six Financial Ratios The balance sheet for Bearing Industries, Inc. at the end of 20Y9 indicated the following: Bonds payable, 8% (due in 30 years) $2,000,000 Preferred $5 stock, $100 par 528,000 Common stock, $13 par 233,376 Income before income tax was $560,000, and income taxes were $84,800 for the current year. Cash dividends paid on common stock during the current year totaled $161,568. The common stock was selling for $225 per share at the end of the year. The percentage shown on the Bonds Payable line is the bond's contract rate (or coupon rate) the annual percentage of interest the bonds will pay, calculated on the total liability shown on the right; The amounts on the right are all in dollars (they are the amounts from the balance sheet). On the stock lines, they represent the total par value of each line. So, to calculate the number of shares outstanding for each type of stock, you would divide the total par value by the per share par value shown on each line on the left;Explanation / Answer
A) TImes Interest Earned Ratio = Earning Before Interest and Taxes / Interest
= ( Net income before tax - Interest ) / Interest
= ( 560000 - 2000000 * 8%) / 2000000 *8%
= ( 560000 - 160000) / 160000 = 2.5
B) TImes earned preferred dividends = Net income after tax / Preferred diidends
= ( 560000 - 84800) / ( 5% * 528000) = 18.00 times
C) Earning per share on common stock = (Net income - Preferred dividends) / No. of shares
= ( 560000 - 84800 - 5% * 528000) / (233376 / 13) = 25.00
D) Price earning ratio = Market price os share / EPS = 225 / 25 = 9
E) Dividend per share = Dividends paid / No of shares
No of shares = 233376 / 13 = 17952
Dividend per share = 161568 / 17952 = 9 per share
F) Dividend yiled = Dividend per share / Current market price = 9 / 225 = 4.00%