Question Details

Terry Corporation's payout ratio for 2002 



1. The profit margin ratio is calculated by dividing
a. sales by cost of goods sold.
b. gross profit by net sales.
c. net income by stockholders' equity.
d. net income by net sales.
Use the following information for questions 2-3.
Terry Corporation had net income of $200,000 and paid dividends to common stockholders of
$40,000 in 2002. The weighted average number of shares outstanding in 2002 was 50,000
shares. Terry Corporation's common stock is selling for $60 per share on the New York Stock
Exchange.
2. Terry Corporation's price-earnings ratio is
a. 3.8 times.
b. 15 times.
c. 18.8 times.
d. 6 times.
3. Terry Corporation's payout ratio for 2002 is
a. $4 per share.
b. 25%.
c. 20%.
d. 12.5%.
4. Grand Company reported the following on its income statement:
Income before income taxes $400,000
Income tax expense 100,000
Net income $300,000
An analysis of the income statement revealed that interest expense was $100,000. Grand
Company's times interest earned was
a. 5 times.
b. 4 times.
c. 3.5 times.
d. 3 times.
5. The debt to total assets ratio measures
a. the company's profitability.
b. whether interest can be paid on debt in the current year.
c. the proportion of interest paid relative to dividends paid.
d. the percentage of the total assets provided by creditors.



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