Calculate the price-earnings ratio

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Reference no: EM133042212

Question - Sunland Medical manufactures hospital beds and other institutional furniture. The company's comparative balance sheet and income statement for 2019 and 2020 follow.

Comparative Balance Sheet As of December 31

 

2020

2019

Assets

 

 

Current assets

 

 

Cash

$390,000

$417,450

Accounts receivable, net

1,079,000

776,450

Inventory

729,000

681,100

Other current assets

381,400

247,100

Total current assets

2,579,400

2,122,100

Property, plant, & equipment, net

8,659,740

8,439,815

Total assets

$11,239,140

$10,561,915

Liabilities and Stockholders' Equity

 

 

Current liabilities

$3,178,000

$2,846,050

Long-term debt

3,702,700

3,892,600

Total liabilities

6,880,700

6,738,650

Preferred stock, $5 par value

58,900

58,900

Common stock, $0.25 par value

104,600

103,850

Retained earnings

4,194,940

3,660,515

Total stockholders' equity

4,358,440

3,823,265

Total liabilities and stockholders' equity

$11,239,140

$10,561,915

 

Sunland Medical Comparative Income Statement and Statement of Retained Earnings For the Year

 

2020

2019

Sales revenue (all on account)

$10,177,200

$9,614,000

Cost of goods sold

5,611,950

5,298,800

Gross profit

4,565,250

4,315,200

Operating expenses

2,840,200

2,634,150

Net operating income

1,725,050

1,681,050

Interest expense

300,300

308,600

Net income before taxes

1,424,750

1,372,450

Income taxes (30%)

427,425

411,735

Net income

$997,325

$960,715

Dividends paid

 

 

Preferred dividends

29,550

29,450

Common dividends

433,350

413,100

Total dividends paid

462,900

442,550

Net income retained

534,425

518,165

Retained earnings, beginning of year

3,660,515

3,142,350

Retained earnings, end of year

$4,194,940

$3,660,515

Required -

A. Calculate the earnings per share (average of 418,000 shares outstanding for the year) for 2020.

B. Calculate the price/earnings ratio (market price of $48 at year-end) for 2020.

C. Calculate the dividend payout ratio (dividends of $1.25 per common share for the year) for 2020.

Reference no: EM133042212

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