Compute the following ratios for 2014:  (a) Earnings per share.  (b) Price-earnings.  (c) Times interest earned.

Compute the following ratios for 2014: (a) Earnings per share. (b) Price-earnings. (c) Times interest earned.

The income statement for Pointe Company for the
year ended December 31, 2014 appears below.

Sales $720,000

Cost
of goods sold 380,000

Gross
profit 340,000

Expenses 190,000*

Net
income $150,000

*Includes $20,000 of
interest expense and $25,000 of income tax expense.

Additional information:

1. Common
stock outstanding on January 1, 2014 was 50,000 shares. On July 1, 2014, 10,000
more shares were issued.

2. The
market price of Pointe’s stock was $11.70 at the end of 2014.

3. Cash
dividends of $30,000 were paid, $7,000 of which were paid to preferred
stockholders.

Instructions

Compute the
following ratios for 2014:

(a) Earnings per share.

(b) Price-earnings.

(c) Times interest earned.


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