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The financial statements of Trail Apparel include the following selected data (in millions):
($ in thousands, except stock price) 2021 2020
Sales $729,220 $754,458
Net income 16,800 14,520
Dividends 4,960 3,890
Stockholders' equity, end of year 240,150 225,450
Shares outstanding 41,000 36,000
Average stock price $5.80 4.40
Required: Calculate the following amounts for 2021:
1. Return on equity 3.6%
2. Dividend yield
3. Earnings per share
4. Price-earnings ratio

Respuesta :

Answer:

1. The Return on equity is 3.6%

2. The Dividend yield  is 2.08%

3. The Earnings per share  is $0.40

4. The Price-earnings ratio is 14.50

Explanation:

1. In order to calculate the Return on equity we would have to use the following formula:

Return on equity=Net Income/Average Equity

Average Equity= $240,150 + $225,450= $465,600

Return on equity=$16,800/$465,600

Return on equity= 3.6%

2. In order to calculate the Dividend yield we would have to use the following formula:

Dividend yield= Dividend per share/Average Stock price

Dividend per share= 4,960/41000=$0.1209

Dividend yield=$0.1209/$5.80=2.08%

3.  In order to calculate the Earnings per share we would have to use the following formula:

Earnings per share= Net Income/Shares Outstanding

Earnings per share=16,800/41,000=$0.40

4. In order to calculate the Price-earnings ratio we would have to use the following formula:

Price-earnings ratio=Average Stock Price/EPS

Price-earnings ratio=$5.80/$0.40=14.50