Exercise 15-2 Financial Ratios for Common Stockholders [LO2]Comparative financial statements for Heritage Antiquing Services for the fiscal year ending December 31 appear on the following page. The company did not issue any new common or preferred stock during the year. A total of 500 thousand shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.50. The market value of the company’s common stock at the end of the year was $28. All of the company’s sales are on account.Heritage Antiquing Services Comparative Balance Sheet (dollars in thousands)This YearLast Year Assets Current assets: Cash$1,130$1,320 Accounts receivable, net9,6008,100 Inventory13,90010,800 Prepaid expenses720560 Total current assets25,35020,780 Property and equipment: Land9,7009,700 Buildings and equipment, net45,95840,784 Total property and equipment55,65850,484 Total assets$81,008$71,264 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable$20,500$18,900 Accrued payables920750 Notes payable, short term240240 Total current liabilities21,66019,890 Long-term liabilities: Bonds payable8,1008,100 Total liabilities29,76027,990 Stockholders’ equity: Preferred stock1,0001,000 Common stock500500 Additional paid-in capital4,0004,000 Total paid-in capital5,5005,500 Retained earnings45,74837,774 Total stockholders’ equity51,24843,274 Total liabilities and stockholders’ equity$81,008$71,264Heritage Antiquing Services Comparative Income Statement and Reconciliation (dollars in thousands)This YearLast Year Sales$70,000$65,000 Cost of goods sold37,00036,000 Gross margin33,00029,000 Selling and administrative expenses: Selling expenses11,30010,100 Administrative expenses7,1006,400 Total selling and administrative expenses18,40016,500 Net operating income14,60012,500 Interest expense810810 Net income before taxes13,79011,690 Income taxes5,5164,676 Net income8,2747,014 Dividends to preferred stockholders50330 Net income remaining for common stockholders8,2246,684 Dividends to common stockholders250250 Net income added to retained earnings7,9746,434 Retained earnings, beginning of year37,77431,340 Retained earnings, end of year$45,748$37,774Required:Compute the following financial ratios for common stockholders for this year:1.Gross margin percentage. (Round your answer to 1 decimal place. Omit the “%” sign in your response.) Gross margin percentage%2.Earnings per share of common stock. (Round your answer to 2 decimal places. Omit the “$” sign in your response.) Earnings$ per share3.Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.) Price-earnings ratio 4.Dividend payout ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place. Omit the “%” sign in your response.) Dividend payout ratio%5.Dividend yield ratio. (Round your answer to 1 decimal place. Omit the “%” sign in your response.) Dividend yield ratio%6.Return on total assets. (Round your answer to 1 decimal place. Omit the “%” sign in your response.) Return on total assets%7.Return on common stockholders’ equity. (Round your answer to 1 decimal place. Omit the “%” sign in your response.) Return on common stockholders’ equity%8.Book value per share. (Round your answer to 2 decimal places. Omit the “$” sign in your response.) Book value$ per share
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