Utterson Inc. (Utterson) is a small manufacturing company in northern Ontario. Utterson's owner has approached you to take an equity position in the company. The owner has provided the balance sheets for the last two years. In addition, you have learned that net income in 2017 was $35,000, interest expense was $11,000, $5,000 in dividends was paid on the preferred shares, and $10,000 was paid on the common shares on December 31. Utterson's tax rate is 18 percent. The estimated market value of Utterson's shares on December 31, 2017 was $15 per share, the weighted-average number of shares outstanding during 2017 was 20,000, and there were 25,000 shares outstanding on December 31, 2017.

Required:
Calculate the following ratios for 2017: current ratio, debt-to-equity ratio, return on assets, return on equity, basic earnings per share, dividend payout ratio, dividend yield, and price-to-book ratio.

Transcribed Image Text:

Utterson Inc Balance sheets as of December 31 2017 2016 2017 2016 Liabilities and Shareholders' Equity Assets Current assets Non-current assets 264,000 240,000Long-term debt $100,000$90,000 Current liabilities 75,000 S 73,000 110,000127,000 25,000 25,000 70,000 50,000 Preferred shares Common shares Accumulated other comprehensive income Retained earnings Total liabilities and 5,000 (4,000) 79,00059,000 Total assets $364,000 $330,000 shareholders' equity S364,000 $330,000