The income statement for Woodford Corporation for the year ended December 31, 2021 appears below: *Includes $ 30,000 of interest expense and $ 16,000 of income tax expense.
Additional information:
1. The weighted average number of common shares issued on December 31, 2021 were 50,000 shares.
2. The market price of Woodford's shares was $ 18 at the end of 2021.
3. Cash dividends of $ 10,000 were paid, $ 6,000 of which were paid to preferred shareholders.
Instructions
a) Calculate the following ratios for 2021:
i. earnings per share
ii. price-earnings
iii. interest coverage
iv. total dividend payout
b) Comment on the above ratios, assuming the averages for the industry in which Woodford operates are as follows:
(i) earnings per share $ 1.20
(ii) price-earnings 10 times
(iii) interest coverage 2.2 times

Question

The income statement for Woodford Corporation for the year ended December 31, 2021 appears below:  *Includes $ 30,000 of interest expense and $ 16,000 of income tax expense.
Additional information:
1. The weighted average number of common shares issued on December 31, 2021 were 50,000 shares.
2. The market price of Woodford's shares was $ 18 at the end of 2021.
3. Cash dividends of $ 10,000 were paid, $ 6,000 of which were paid to preferred shareholders.
Instructions
a) Calculate the following ratios for 2021:
i. earnings per share
ii. price-earnings
iii. interest coverage
iv. total dividend payout
b) Comment on the above ratios, assuming the averages for the industry in which Woodford operates are as follows:
(i) earnings per share $ 1.20
(ii) price-earnings 10 times
(iii) interest coverage 2.2 times

Quizplus · Accepted Answer

The Answer of The income statement for Woodford Corporation for the year ended December 31, 2021 appears below:  *Includes $ 30,000 of interest expense and $ 16,000 of income tax expense.
Additional information:
1. The weighted average number of common shares issued on December 31, 2021 were 50,000 shares.
2. The market price of Woodford's shares was $ 18 at the end of 2021.
3. Cash dividends of $ 10,000 were paid, $ 6,000 of which were paid to preferred shareholders.
Instructions
a) Calculate the following ratios for 2021:
i. earnings per share
ii. price-earnings
iii. interest coverage
iv. total dividend payout
b) Comment on the above ratios, assuming the averages for the industry in which Woodford operates are as follows:
(i) earnings per share $ 1.20
(ii) price-earnings 10 times
(iii) interest coverage 2.2 times

The Income Statement for Woodford Corporation for the Year Ended