Albion Inc. provided the following information for its most recent year of operation. The tax rate is
Question:
Albion Inc. provided the following information for its most recent year of operation. The tax rate is 40 percent.
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
Common shares outstanding—December 31 ....... 40,000
Average common stockholders’ equity ......... $55,000
Market price per common share ............... $12
Required:
1. Compute the following:
a. Return on sales
b. Return on assets
c. Return on common stockholders’ equity
d. Earnings per share
e. Price-earnings ratio
f. Dividend yield
g. Dividend payout ratio
2. If you were considering purchasing stock in Albion, which of the above ratios would be of most interest to you? Explain.
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
Cornerstones of Managerial Accounting
ISBN: 978-0324660135
3rd Edition
Authors: Mowen, Hansen, Heitger