Profitability Analysis Albion Inc. provided the following information for its most recent year of operations. The tax rate is 40%. Sales $100,000 Cost of goods sold 45,000 Net income 10,500 Interest expense 350 Assets-beginning balance 120,000 Assets-ending balance 126,000 Preferred dividends $300 Common dividends (paid December 31) $8,000 Common shares outstanding-January 1 30,000 shares Common shares outstanding-December 31 40,000 shares Average common stockholders' equity $55,000 Market price per common share $12

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Round all answers to two decimal places except for dividend payout ratio which is rounded to four decimal places.
1. Compute the following:
a. Return on sales
17.85
%
b. Return on assets
8.71
%
c. Return on stockholders' equity
18.45
%
d. Earnings per share
0.29
e. Price-earnings ratio
f. Dividend yield
%
g. Dividend payout ratio
2. CONCEPTUAL CONNECTION: Assume you are considering an investment to provide retirement income. Based on the above,
which would be of particular interest to you?
Since all the ratios are profitability
ratios, they should all be of interest to investors. Some, however, may be of more
interest than others depending on the objectives of the potential investor. For an investor looking for an investment to provide
retirement income, the price-earnings ratio
would be of particular interest.
Transcribed Image Text:Round all answers to two decimal places except for dividend payout ratio which is rounded to four decimal places. 1. Compute the following: a. Return on sales 17.85 % b. Return on assets 8.71 % c. Return on stockholders' equity 18.45 % d. Earnings per share 0.29 e. Price-earnings ratio f. Dividend yield % g. Dividend payout ratio 2. CONCEPTUAL CONNECTION: Assume you are considering an investment to provide retirement income. Based on the above, which would be of particular interest to you? Since all the ratios are profitability ratios, they should all be of interest to investors. Some, however, may be of more interest than others depending on the objectives of the potential investor. For an investor looking for an investment to provide retirement income, the price-earnings ratio would be of particular interest.
Profitability Analysis
Albion Inc. provided the following information for its most recent year of operations. The tax rate is 40%.
Sales
$100,000
Cost of goods sold
45,000
Net income
10,500
Interest expense
350
Assets-beginning balance
120,000
Assets-ending balance
126,000
Preferred dividends
$300
Common dividends (paid December 31)
$8,000
Common shares outstanding-January 1
30,000 shares
Common shares outstanding-December 31
40,000 shares
Average common stockholders' equity
$55,000
Market price per common share
$12
Transcribed Image Text:Profitability Analysis Albion Inc. provided the following information for its most recent year of operations. The tax rate is 40%. Sales $100,000 Cost of goods sold 45,000 Net income 10,500 Interest expense 350 Assets-beginning balance 120,000 Assets-ending balance 126,000 Preferred dividends $300 Common dividends (paid December 31) $8,000 Common shares outstanding-January 1 30,000 shares Common shares outstanding-December 31 40,000 shares Average common stockholders' equity $55,000 Market price per common share $12
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