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Concept Introduction:
The terms that are included in the common stock of a company as authorized capital, issued and outstanding, shares bought back or
Requirement 1
To determine:
Book value per share for each company using these data
![Check Mark](/static/check-mark.png)
Explanation of Solution
For Apple, it is calculated as under.
The book value of a share is calculated using a formula
For, Apple.
• Total Shareholder’s Equity = $ 119,355 (in millions)
• Common stock outstanding = 5,578.753 (in millions)
Thus, book value per share for 2015 = 21.39.
For Google, it is calculated as under.
The book value of a share is calculated using a formula
For, Apple.
• Total Shareholder’s Equity = $ 120,331 millions
• Common stock outstanding = 687.348
Thus, book value per share for 2015 = 175.07
Requirement 2
To compute:
Basic EPS for each company
![Check Mark](/static/check-mark.png)
Explanation of Solution
The Basic EPS is calculated by using the formula
For Apple, Basis EPS
The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million
Thus, Basic EPS for Apple = $ 9.28
For Google, Basis EPS
The net income = $ 16,348 million and Weighted average common stock = 684.626 million
Thus, Basic EPS for Google = $ 23.89.
Requirement 3
To compute:
Dividend yield for each company-
![Check Mark](/static/check-mark.png)
Explanation of Solution
Dividend yield for Apple = 1.90 %
Dividend yield for Google = 0 %
These are calculated as under
For Apple
• Cash dividends =$ 1.98
• Market price per share = $ 107
Dividend yield =
For Google
• Cash dividends = 0
• Market price per share =$ 775.10
Dividend yield =
No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.
Only, Apple’s dividend yield is characterizing its net income or growth.
Requirement 4
To Compute:
Price-earnings ratio for each company
![Check Mark](/static/check-mark.png)
Explanation of Solution
Price-earnings ratio for Apple = 11.53
Price-earnings ratio for Google = 32.44
These ratios are calculated as under
Price-earnings ratio for Apple =
• Market price per share = $ 107
• Earnings per share = $ 9.28
Price-earnings ratio for Google =
• Market price per share = $ 775.10
• Earnings per share = $ 23.89
The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.
The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.
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Chapter 13 Solutions
Fundamental Accounting Principles
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