Question

MARIN INC. Income Statement For the Year Ended December 31, 2020

Sales revenue $425,500
Cost of goods sold 240,400
Gross profit 185,100
Expenses (including $12,000 interest and $26,000 income taxes) 75,400
Net income $109,700

Additional information:
1. Common stock outstanding January 1, 2022, was 26,300 shares, and 36,100shares were outstanding at December 31, 2022.
2. The market price of Marin stock was $14 in 2022.
3. Cash dividends of $24,000 were paid, $3,600 of which were to preferred stockholders.

Compute the following measures for 2022:
a. Earnings per share
b. Price-earnings ratio
c. Payout ratio
d. Times interest earned

Answer 1

MARIN INC.

a. Earnings per share = $106,100/36,100 = $2.94

b. Price-earnings ratio = $14/$2.94 = 4.76 times

c. Payout ratio = $20,400/$106,100 = 0.19

d. Times interest earned = EBIT/Interest expense

= ($185,100 - $37,400)/$12,000

= $147,700/$12,000

= 12.31 times

Step-by-step explanation:

A) Data and Calculations:

MARIN INC. Income Statement For the Year Ended December 31, 2020

Sales revenue $425,500

Cost of goods sold 240,400

Gross profit 185,100

Expenses:

Operating expenses $37,400

Interest $12,000

Income taxes $26,000

Total expenses 75,400

Net income $109,700

Preferred stock dividends 3,600

Available to common stock $106,100

Additional information

1. Outstanding common stock:

January 1, 2022 = 26,300 shares

December 31, 2022 = 36,100 shares

Additional issues = 9,800 shares

2. Market price of stock = $14

3. Cash dividends:

Preferred stock $3,600

Common stock 20,400

Total dividends paid $24,000