BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Five measures of solvency or profitability

The balance sheet for Garcon Inc. at the end of the current fiscal year indicated the following:

Bonds payable, 8% $5,000,000
Preferred $4 stock, $50 par 2,500,000
Common stock, $10 par 5,000,000

Income before income tax was $3,000,000, and income taxes were $1,200,000 for the current year. Cash dividends paid on common stock during the current year totaled $1,200,000. The common stock was selling for $32 per share at the end of the year. Determine each of the following: (a) times interest earned ratio, (b) earnings per share on common stock, (c) price-earnings ratio, (d) dividends per share of common stock, and (e) dividend yield. Round ratios and percentages to one decimal place, except for per-share amounts.

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Given info: Income before income tax and interest expense.

To determine: Times interest earned ratio

Explanation

Times interest earned ratio quantifies the number of times the earnings before interest and taxes can pay the interest expense. First, determine the sum of income before income tax and interest expense. Then, divide the sum by interest expense.

Formula:

Times-interest-earned ratio }=Income before income tax+

(b)

To determine
Earnings per share on the common stock

(c)

To determine
Price earnings ratio

(d)

To determine
Dividend per share of common stock

(e)

To determine
Dividend yield

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Explain how absolute advantage and comparative advantage differ.

Principles of Economics (MindTap Course List)

Explain how CVP analysis developed for single products can be used in a multiple-product setting.

Managerial Accounting: The Cornerstone of Business Decision-Making

Refer to an online finance source such as Yahoo! Finance or Google Finance to look up the P/E ratios for Verizo...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Name and define the six major elements of the accounting equation.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)