Question

Here is the income statement for Myers, Inc. Myers, Inc. Income Statement For the Year Ended December 31, 2020 Sales revenue $424,000 Cost of goods sold 226,000 Gross profit 198,000 Expenses (including $10,000 interest and $28,500 income taxes) 96,000 Net income $ 102,000 Additional information: 1. Common stock outstanding January 1, 2020, was 16,000 shares, and 24,000 shares were outstanding at December 31, 2020. 2. The market price of Myers stock was $20.37 in 2020. 3. Cash dividends of $24,480 were paid, $5,000 of which were to preferred stockholders. Compute the following measures for 2020. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.) (a) Earnings per share $ (b) Price-earnings ratio times (c) Payout ratio % (d) Times interest earned times LINK TO TEXT

Answer 1

Earnings per share = $4.85 per share

Price earning ratio = 4.2 times

Payout ratio = 19.10%

Times interest earned = 14.05 times

Explanation:

As per the data given in the question,

a) Earnings per share = (Net income - Preferred dividend) ÷ share outstanding

= ($102,000 - $5,000) ÷ 20,000 shares

= $4.85 per share

The 20,000 shares is come from

= (16,000 shares + 24,000 shares) ÷ 2

= 20,000 shares

b) Price earning ratio = MPS ÷ EPS

= $20.37 ÷ $4.85

= 4.2 Times

c) Payout ratio = ($24,480 - $5,000) ÷ $102,000

= 19.10%

d) Times interest earned = Income before interest and tax ÷ interest expense

= ($102,000 + $10,000 + $28,500) ÷ $10,000

= 14.05 times