nning Company’s income statement information follows: Year 3 Year 2 Net sales $ 420,000 $ 257,000 Income before interest and taxes 114,000 83,000 Net income after taxes 55,720 62,900 Interest expense 8,900 7,900 Stockholders’ equity, December 31 (Year 1: $198,000) 312,000 242,000 Common stock, December 31
Fanning Company’s income statement information follows:
| Year 3 | Year 2 | ||||||
| Net sales | $ | 420,000 | $ | 257,000 | |||
| Income before interest and taxes | 114,000 | 83,000 | |||||
| Net income after taxes | 55,720 | 62,900 | |||||
| Interest expense | 8,900 | 7,900 | |||||
| 312,000 | 242,000 | ||||||
| Common stock, December 31 | 195,000 | 172,500 | |||||
The average number of shares outstanding was 7,800 for Year 3 and 6,900 for Year 2.
Required
Compute the following ratios for Fanning for Year 3 and Year 2.
a. Number of times interest was earned. (Round your answers to 2 decimal places.)
b. Earnings per share based on the average number of shares outstanding. (Round your answers to 2 decimal places.)
c. Price-earnings ratio (market prices: Year 3, $65 per share; Year 2, $76 per share).(Round your intermediate and final answers to 2 decimal places.)
d. Return on average equity. (Round your percentage answers to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).)
e. Net margin. (Round your percentage answers to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).)
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