The Balance Sheet for Appalachian Corporation at the End of the Current

question 168

Essay

The balance sheet for Appalachian Corporation at the end of the current year includes the following: $\begin{array}{lrr} \text { Bonds payable, 6 \% } &\$5,000,000\\ \text {6 \% Preferred stock, \$100 par } &1,000,000\\ \text { Common stock, \$ 10 par} &2,000,000\end{array}$
Net income was $565,000 and income tax expense for the current year amounted to $285,000. Cash dividends paid on common stock were $200,000, and the common stock was selling for $28 per share at the end of the year. There were no ownership changes during the year.
Instructions
Determine each of the following:
(a) Number of times that bond interest was earned.
(b) Earnings per share for common stock.
(c) Price-earnings ratio.

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Definitions:

Equipment

Tangible property used in operations, such as machinery and hardware, that contribute to the production or service of a business.

Inventory

A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold; considered an asset on the balance sheet.

Book Value

The net asset value of a company calculated as total assets minus intangible assets and liabilities.

Net Income

The residual income a company has after expenses and taxes are deducted from its total income.