### Understanding Financial Ratios and Calculating Earnings Per Share (EPS)On this educational page, we will delve into the financial metrics used to analyze a company's performance, specifically focusing on the Price-to-Earnings (P/E) ratio and Return on Equity (ROE). We will also discuss the calculation of Earnings Per Share (EPS). #### Key Financial Metrics Explained:1. **Earnings Per Share (EPS):** EPS is a critical measure of a company's profitability. It is calculated as: \[ \text{EPS} = \frac{\text{Net Income}}{\text{Outstanding Shares}} \]2. **Price-to-Earnings (P/E) Ratio:** The P/E ratio indicates the market's valuation of a company's earnings and is calculated by: \[ \text{P/E Ratio} = \frac{\text{Market Price per Share}}{\text{EPS}} \]3. **Return on Equity (ROE):** ROE measures the return generated on the shareholders' equity and is calculated by: \[ \text{ROE} = \frac{\text{Net Income}}{\text{Shareholders' Equity}} \]#### Example Data and Calculations:**Selected Data for Dalton Company for Year 3:**- **Common Stock (1,800 Shares):** $97,800- **Preferred Stock (1,200 Shares at $25 Par, 4%):** $30,000- **Less: Treasury Stock (3,000 Shares at $25 Par, $28 Market Value):** $255,000- **Retained Earnings:** $281,250- **Total Shareholders' Equity:** $966,250**Net Income:** $27,000**Market Price per Share:** $39.000Using the provided data, let’s perform the key calculations:1. **Earnings Per Share (EPS):** \[ \text{EPS} = \frac{\text{Net Income}}{\text{Common Shares}} = \frac{27,000}{1,800} = 15 \]2. **Price-to-Earnings (P/E) Ratio:** \[ \text{P/E Ratio} = \frac{39.000}{15} = 2.6 \]3. **Return on Equity (

Earning Per Share is the share of earning that is available to Equity shareholder on per share. It…

Selected data for Dalton Company for Year 3 follows: Earnings (net income) 255,000 Common stock (45,000 shares no par, market value $28) $330,000 Preferred stock (13,200 shares at $25 par, 4%) 008 L6 $ Retained earnings 281,250 Less: Treasury stock Preferred (1,800 shares) Common (1,800 shares) 000'L2S 000'zt Total stockholders' equity 000'6E $827,250 equired Calculate Dalton Company's earnings per share ratio, price-earnings ratio and return on equity ratio. (Round you ecimal places.) armings per share rice-earnings ratio eturn on equity

Selected data for Dalton Company for Year 3 follows: Earnings (net income) 255,000 Common stock (45,000 shares no par, market value $28) $330,000 Preferred stock (13,200 shares at $25 par, 4%) 008 L6 $ Retained earnings 281,250 Less: Treasury stock Preferred (1,800 shares) Common (1,800 shares) 000'L2S 000'zt Total stockholders' equity 000'6E $827,250 equired Calculate Dalton Company's earnings per share ratio, price-earnings ratio and return on equity ratio. (Round you ecimal places.) armings per share rice-earnings ratio eturn on equity

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Earnings per share Financial statement data for the years 20Y5 and 20Y6 for Black Bull Inc. follow: 20Y5 20Y6 Net income $1,715,000 $2,437,000 Preferred dividends $50,000 $50,000 Average number of common shares outstanding 90,000 shares 110,000 shares a. Determine the earnings per share for 20Y5 and 20Y6. Round to two decimal places. 20Y5 20Y6 Earnings per Share $fill in the blank 1 $fill in the blank 2 b. Is the change in the earnings per share from 20Y5 to 20Y6 favorable or unfavorable?
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Dividend constraints The Howe Company's stockholders' equity account is as follows: have been included as part of the $2.1 million retained earnings. a. What is the maximum dividend per share that the firm can pay? (Assume that legal capital includes all paid-in capital.) b. If the firm has $180,000 in cash, what is the largest per-share dividend it can pay without borrowing? The earnings available for common stockholders from this period's operations are $100,000, which c. Indicate the accounts and changes, if any, that will result if the firm pays the dividends indicated in parts a and b. d. Indicate the effects of an $80,000 cash dividend on stockholders' equity. a. The maximum dividend per share that the firm can is $ (Round to the nearest cent.)
Earnings per share Financial statement data for the years 20Y5 and 20Y6 for Black Bull Inc. follow: 20Y5 20Y6 Net income $1,761,000 $2,555,500 Preferred dividends $60,000 $60,000 Average number of common shares outstanding 90,000 shares 115,000 shares a. Determine the earnings per share for 20Y5 and 20Y6. Round to two decimal places. 20Y5 20Υ6 Earnings per Share $ b. Is the change in the earnings per share from 20Y5 to 20Y6 favorable or unfavorable?
Earnings Per Share Financial statement data for the years ended December 31 for Cottontop Corporation follow: 20Y3 20Y2 Net income Preferred dividends Average number of common shares outstanding 95,000 shares a. Determine the earnings per share for 20Y3 and 20Y2. Round your answers to two dectmal places. per share 20Y2 per share b. Does the change in the earnings per share from 20Y2 to 20Y3 indicate a favorable or unfavorable trend?
Corporations: Organization, Stock Transactions, and Dividend Samuels, Inc. reported net income for 2011 is $105,000. During 2011 the company had 5,000 shares of $100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding. Samuel 75. earnings per share for 2011 is $4.00 b. $5.25 a. $6.50 d. $5.00 c. OBJ: LO: 13-08 DIF: KEY: Bloom's: Application Moderate ANS: A PTS: 1 BUSPROG: Analytic NAT: 76. Sabas Company has 20.000 shares ofSION
Skysong Inc. presented the following data. Net income Preferred stock:52,000shares outstanding, $100 par, 8% cumulative, not convertible Common stock: Shares outstanding 1/1 Issued for cash, 5/1 Acquired treasury stock for cash, 8/1 2-for-1 stock split, 10/1 Compute earnings per share.(Round answer to 2 decimal places, e.g. $2.55.) Earnings per share $ $2,470,000 5,200,000 736,800 315,600 134,400
Earnings per share Financial statement data for the years 20Y5 and 20Y6 for Black Bull Inc. follow: 20Y5 20Y6 Net income $1,761,000 $2,532,500 Preferred dividends $60,000 $60,000 Average number of common shares outstanding 90,000 shares 115,000 shares a. Determine the earnings per share for 20Y5 and 20Y6. Round to two decimal places. 20Y5 20Y6 Earnings per Share $fill in the blank 1 $fill in the blank 2 b. Is the change in the earnings per share from 20Y5 to 20Y6 favorable or unfavorable? fill in the blank
Financial statement data for the years ended December 31 for Cottontop Corporation follow: 20Y3 20Y2 Net income $957,250 $832,250 Preferred dividends $146,000 $146,000 Average number of common shares outstanding 55,000 shares 45,000 shares a. Determine the earnings per share for 20Y3 and 20Y2. Round your answers to two decimal places. 20Y3 $fill in the blank 1 per share 20Y2 $fill in the blank 2 per share b. Does the change in the earnings per share from 20Y2 to 20Y3 indicate a favorable or unfavorable trend?Unfavorable
) Calculate the weighted average number of shares for the following Shares outstanding 100,000 Date Shares changes Beginning balance 20,000 shares issued 50% stock dividend 50,000 shares issued 1Jan-07 120,000 180,000 230,000 230,000 1-Apr-07 1.Jun-07 1-0ct-07 31-Dec-07 Year end balance
Calculated weighted average no. of shares.