Chapter 17, Problem 21E

### Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem
3 views

# Earnings per share, price-earnings ratio, dividend yieldThe following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year:The net income was $1,750,000, and the declared dividends on the common stock were$1,125,000 for the current year. The market price of the common stock is $45 per share.For the common stock, determine (a) the earnings per share, (b) the price-earnings ratio, (c) the dividends per share, and (d) the dividend yield. Round ratios and percentages to one decimal place, except for per-share amounts. (a) To determine Determine Earnings per share on the common stock. Explanation Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company. Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock. Formula: Earningsâ€‰perâ€‰shareÂ =Â Netâ€‰incomeÂ â€“Â Preferredâ€‰dividendsWeightedÂ averageÂ numberÂ ofÂ commonÂ sharesÂ outstanding Calculate Earnings per share on the common stock. EarningsÂ perÂ share=[NetÂ incomeâˆ’PreferredÂ dividends(WeightedÂ averageÂ sharesÂ ofÂ commonÂ stockÂ outstanding)]=$1,750,000âˆ’$250,000500,000â€‰shares=$1,500,00050,000â€‰shares=\$3

(b)

To determine

Determine Price earnings ratio.

(c)

To determine

Determine Dividend per share of common stock.

(d)

To determine

Determine Dividend yield ratio.

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