Pippin Piping Co. manufactures decorative fabric trims. The company’s financial
ID: 2591286 • Letter: P
Question
Pippin Piping Co. manufactures decorative fabric trims. The company’s financial statements follow.
Additional information
Comparative Income Statements
For the Years Ended December 31 2016 2015 2014 Sales revenue $576,600 $523,000 $484,200 Cost of goods sold 291,000 259,200 234,300 Gross margin 285,600 263,800 249,900 Operating expenses 106,200 104,600 104,100 Operating income 179,400 159,200 145,800 Other revenue 22,500 15,900 23,900 Interest expense 11,200 10,500 11,900 Income before income tax 190,700 164,600 157,800 Income tax expense (40%) 76,280 65,840 63,120 Net income $114,420 $98,760 $94,680 How does the market view Pippin? Earnings per share (Round answers to 2 decimal places, e.g. 52.75.) 2014 2015 2016 $ Price/earnings ratio (Round answers to 1 decimal places, e.g. 52.7.) 2014 2015 2016 Dividend payout ratio (Round answers to 1 decimal places, e.g. 52.7.) 2014 2015 2016
Explanation / Answer
S.No Formula 2014 2015 2016 1. Earning per share=(Net income-preferred dividend)/Weighted Average Number of Common Shares Outstanding 94680/10000=9.47 98760/12000=8.23 114420/12000=9.54 2 Price earning ratio=Current share price/Earning per share 30/9.47=3.2 35/8.23=4.3 38/9.54=4 3 Dividend payout ratio=Dividend per Share/Earnings per Share 1.25/9.47=13.2% 1.3/8.23=15.8% 1.32/9.54=13.8%