The Balance Sheet for Seuss Company at the End of the Current

question 121

Essay

The balance sheet for Seuss Company at the end of the current fiscal year indicated the following: $$\begin{array} { | l | l | } \hline \text { B onds payable, } 10 \% 20 \text {-year term) } & \$ 5,000,000 \\\hline \text { Preferred } 10 \% \text { stock, } \$ 100 \text { par } & 1,000,000 \\\hline \text { Common stock, } \$ 10 \text { par } & 2,000,000 \\\hline\end{array}$$ Income before income tax was $1,500,000 and income taxes were $200,000 for the current year. Cash dividends paid on common stock during the current year totaled $150,000. The common stock sells for $70 per share at the end of the year.
Determine each of the following:
a) Number of times interest charges are earned
b) Earnings per share on common stock
c) Price-earnings ratio
d) Dividends per share of common stock
e) Dividend yield
Round to one decimal place except earnings per share and dividends per share, which should be rounded to two decimal places.

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Definitions:

Willingness To Pay

The maximum amount an individual is prepared to spend to procure a good or service or to avoid something undesirable.

Consumer Surplus

The split between the total amount consumers are prepared to spend on a good or service and the actual amount they spend.

Demand Curve

A diagram that displays the connection between the cost of a commodity and the level of demand for it within a set timeframe.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, measured above the supply curve to the equilibrium price.