The King Mattress Company Had the Following Operating Results for 2009-2010.In

question 40

Multiple Choice

The King Mattress Company had the following operating results for 2009-2010.In addition,the company paid dividends in both 2009 and 2010 of $60,000 per year and made capital expenditures in both years of $30,000 per year.The company's stock price in 2009 was $8 and $7 in 2010.The industry average earnings multiple for the mattress industry was 9 in 2010 and the free cash flow and sales multiples were 18 and 1.5,respectively.The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2010.
The gross margin percentage for 2010 is (rounded) :

• A)11.2%
• B)12.7%
• C)13.7%
• D)14.9% $650,000/$4,750,000 = 13.7%

---

Definitions:

P/E Ratio

The price-to-earnings ratio compares a company's share price to its earnings per share, indicating how much investors are willing to pay per dollar of earnings.

Dividend Payout Ratio

The fraction of net income a firm pays out to its shareholders in dividends, typically expressed as a percentage.

Interest Burden

Relates to the impact of interest expenses on a company's net income, indicating the portion of profits consumed by interest obligations.

Return-On-Sales Ratio

A measure of a company's operational efficiency, calculated as operating income divided by net sales.