Book Value of Share:
It shows the current book value of each share. It comes after subtracting
Price Earnings ratio:
It shows how much a shareholder pays for every $1 of its dividend. It is determined by dividing Price of share by dividend.
Earnings per share:
It shows how much a shareholder earns on his one share. It is determined by dividing net income from outstanding shares.
1.
Book value of per share of the common stock.
Explanation of Solution
Solution:
Formula for calculating book value per share is:
For A. Company:
Given info,
Total common stockholder’s equity is $119,255,000.
Total number of outstanding shares is $5,578,753.
Substituting, $119,255,000 for total common stockholder’s equity and $5,578,753 for total number of outstanding shares in the above formula,
Hence, the book value of share is $21.39.
For G. Company:
Given info,
Total common stockholder’s equity is $120,331,000.
Total number of outstanding shares is $687.348.
Substituting, $120,331,000 for total common stockholder’s equity and $687.348 for total number of outstanding shares in the above formula,
Hence, the book value of share is $175.07.
2.
Earning per share of the common stock.
2.
Explanation of Solution
Solution:
Formula for earnings per share is:
For A. Company:
Given info,
Net income is $119,355,000.
Total number of outstanding shares is 5,578,753.
Substituting, $119,355,000 for net income and 5,578,753 for total number of outstanding shares in the above formula,
Hence , the earning per share is $21.39.
For G. Company:
Given info,
Net income is $16,348,000.
Total number of outstanding shares is 648.626.
Substituting, $16,348,000 for net income and 648.626 for total number of outstanding shares in the above formula,
Hence , the earning per share is $23.88.
3.
To compute: Dividend yield and explain they are income or growth stock.
3.
Explanation of Solution
Solution:
Formula for calculating dividend yield is:
For A. Company:
Given info,
Dividend per share is $1.98.
Value of each share is $107.25.
Substituting, $1.98 for dividend per share and $107.25 for value of each share in the above formula,
Hence , the dividend yield is 1.85%.
For G. Company:
Given info,
Dividend per share is $0.
Value of each share is $775.10.
Substituting, $0 for dividend per share and $775.10 for value of each share in the above formula,
Hence , the dividend yield is 0%.
They both are growth stock as A. Company gives low return and G. Company give no return at all. It means they are reinvesting the money.
Hence, both are growth stock.
4.
To compute: Price earnings ratio and identify which one is undervalued.
4.
Explanation of Solution
It shows the amount paid by the investor for every $1 of dividend.
Formula for calculating price earnings ratio:
5.
To compute: Price earnings ratio and explain them.
5.
Explanation of Solution
It shows the amount paid by the investor for every $1 of dividend.
Formula for calculating price earnings ratio:
For A. Company:
Given info,
Earnings per share are $9.28.
Market value per share is $107.
Substitute, $9.28 for earnings per share and $107 for market value per share in the above formula,
Hence, price earnings ratio is 11.53
For G. Company:
Given info,
Earnings per share are $23.88.
Market value per share is $775.10.
Substitute, $23.88 for earnings per share and $775.10 for market value per share in the above formula,
Hence, price earnings ratio is 32.46
It show that that amount paid by the investor of A. Company for every $1 of dividend is $11.53 and amount paid by the investor of G. Company for the payment of $1 dividend is $32.46. It means investor of G. Company is triple the amount of money for same dividend.
Hence, Investor of G. Company is paying triple the amount of money for same dividend as compare to the A. Company.
Want to see more full solutions like this?
Chapter 11 Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
- Identify any Two (2) Public Listed Company listed under the Main Market of Bursa Malaysia originating from the same industry. Download the most recent annual report of the companies you have chosen. Analyze and compare the annual reports and critically assess the difficulties in preparing a set of useful financial statements, which exhibits all the primary qualitative characteristics necessary for all users of financial statements( E.g. Comparability ). How well do you feel that your chosen companies have achieved this purpose ? ( Minimum 1200 words )arrow_forwardDescribe the responsibilities of a financial analyst. Write five to seven bullet points outlining the responsibilities of a financial analyst. Write in complete sentences. Use an example to discuss the importance of analyzing and managing finances to help make business decisions. How do these responsibilities help inform management decisions? What would happen if management didn’t have this information? Consider the bullet points you outlined in the previous section. Then write a brief paragraph that answers the following questions. Use examples to support your claims. Explain how to use accounting principles to analyze a business’s financial health. Give examples to support your claims. What accounting information do financial analysts use? What would happen if that information was not available or was not accurate? Write a brief paragraph that explains how financial analysts use accounting principles to analyze a business’s financial health. In your paragraph, also answer…arrow_forwardChoose a major publicly traded corporation, then go to the corporation's site and retrieve the information needed for this assignment. Provide information about the history of the corporation and its current product offerings. Provide a screenshot of the corporate’s latest reported income statement. Organize the income statement in an Excel file to enable you to verify the arithmetic in the income statement, and explain your verifications. Also, explain the nature of each item in the income statement. Information for the Hi-Test company’s production process for September follows. Assume that all materials are added at the beginning of this production process, and that conversion costs are added uniformly throughout the process. Work in process inventory, September 1 (2,000 units, 100% complete with respect to direct materials, 80% complete with respect to direct labor and overhead; consists of $45,000 of direct materials cost and $56.320 conversion cost). = $101,320 Costs…arrow_forward
- Choose a major publicly traded corporation, then go to the corporation's site and retrieve the information needed for this assignment. Provide information about the history of the corporation and its current product offerings. Provide a screenshot of the corporate’s latest reported income statement. Organize the income statement in an Excel file to enable you to verify the arithmetic in the income statement, and explain your verifications. Also, explain the nature of each item in the income statement. Information for the Hi-Test company’s production process for September follows. Assume that all materials are added at the beginning of this production process, and that conversion costs are added uniformly throughout the process. Work in process inventory, September 1 (2,000 units, 100% complete with respect to direct materials, 80% complete with respect to direct labor and overhead; consists of $45,000 of direct materials cost and $56.320 conversion cost). = $101,320 Costs…arrow_forwardA company reports accounting data in its financial statements. This data is used for financial analyses that provide insights into a company’s strengths, weaknesses, performance in specific areas, and trends in performance. These analyses are often used to compare a company’s performance to that of its competitors or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Consider the following scenario: You work as an analyst at a credit-rating agency, and you are comparing firms in the construction and engineering sector. One company in the portfolio of companies you are analyzing is a Chinese firm. This firm stands out in the ratio analysis, because the company’s financial ratios are substantially lower than identical financial ratios of the other firms in the sector. You do not dissect the results of the ratio analysis and report this firm as an under-performing company. Which of the following statements about…arrow_forwardExploring a Corporation's Financial Statements Use Yahoo Finance to complete this assignment. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. Using financial websites such as finance.yahoo.com and money.msn.com, you can access a wealth of financial information for companies such as Tesla, Inc. By entering the company's ticker symbol, TSLA, you will be able to access a great deal of useful information, including a summary of what Tesla does (Profile), a chart of its recent stock price (Summary), EPS estimates (Analysts), recent news stories (Summary), and a list of key financial data and ratios (Statistics). In researching a company's operating performance, a good place to start is the recent stock price performance. From an interactive chart, you can obtain a chart of the company's stock price performance and compare it to the overall market (as measured by the S&P 500 index). As you will see, Tesla has…arrow_forward
- You are a financial consultant. You are hired by a manufacturing company to assess its performance Based on financial ratios. Your task is to come up with the following: (1) financial analysis using financial ratios on liquidity, solvency or stability, and profitability; (2) trend analysis, both vertical and horizontal; and (3) comparative financial statements. The analysis should be benchmarked with competitors. Frepare a report indicating your comments on the financial health and performance of the company turenchmarked with competitors) using the following liquidity ratios: (1) current ratio, (2) receivable turnover, (3) inventory turnover, and (4) quick ratio. competitors) using the following ratios: (1) debt ratio, (2) times interest earned ratio, and (3) debt- equity ratio. Give your insights into the relative solvency or stability of the company (as benchmarked with the Also, assess the relative profitability of the company (as benchmarked with competitors) using the following…arrow_forwardSuppose you work for an investment bank where you are assigned to track EchoStar's stock and create reports that brokers can distribute to investors. Investors can then use these reports and decide whether they want to invest in a particular stock. In this scenario, you are working as a _____ analyst.arrow_forwardAs the financial analysts of Mezza Holding Company you are required to write a Memo to the Financial Manager describing the performance of the company and your suggestions on future improvements based on the following financial statements. . State the purpose of your Memo. Describe and interpret ratio results and provide company’s performance analysis based on them. Describe the weaknesses and strength of the company’s financial data. Provide suggestions on how to improve company’s performance.arrow_forward
- Which of the following options is most useful to the financial statement analyst? Select one: a. The shareholders of a Company. b. Common size financial statements and financial ratios. c. Human Resources Management of a Company. d. Public relations material and pro forma statements prepared by the firm.arrow_forwardFinancial Responsibilities: Describe the responsibilities of a financial analyst. Write five to seven bullet points outlining the responsibilities of a financial analyst. Write in complete sentences. Financial Management Decisions: Use an example to discuss the importance of analyzing and managing finances to help make business decisions. Consider the bullet points you outlined in the previous section. Then write a brief paragraph that answers the following questions. Use examples to support your claims. How do these responsibilities help inform management decisions? What would happen if management didn’t have this information? Accounting Principles: Explain how to use accounting principles to analyze a business’s financial health. Give examples to support your claims. Write a brief paragraph that explains how financial analysts use accounting principles to analyze a business’s financial health. In your paragraph, also answer the following questions: What accounting information…arrow_forwardYou are a financial consultant. You are hired by a manufacturing company to assess its performance Based on financial ratios. Your task is to come up with the following: (1) financial analysis using financial ratios on liquidity, solvency or stability, and profitability; (2) trend analysis, both vertical and horizontal; and (3) comparative financial statements. The analysis should be benchmarked with competitors. Prepare a report indicating your comments on the financial health and performance of the company (as benchmarked with competitors) using the following liquidity ratios: (1) current ratio, (2) receivable turnover, (3) inventory turnover, and (4) quick ratio. Give your insights into the relative solvency or stability of the company (as benchmarked with the competitors) using the following ratios: (1) debt ratio, (2) times interest earned ratio, and (3) debt - equity ratio, Also, assess the relative profitability of the company (as benchmarked with competitors) using the…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubPkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE L