GAPAS, DANIEL JOHN L.

FINANCIAL MANAGEMENT

EXERCISE 1: TRUE OR FALSE

1. The purpose of financial statement analysis is not only to understand the historical
results of financial statements but also to use that information to forecast the
future. TRUE
2. Operating ratios measure a firm’s ability to repay its obligations. FALSE
3. One of the common credit ratios is the return on capital ratio. FALSE
4. The revenue growth rate is a ratio that measures the expansion or contraction of
the business. TRUE
5. A ratio is most meaningful when the numerator and denominator are related to
each other. TRUE
6. When an interest coverage ratio is computed, the lower the result, the better the
firm’s ability to make interest payments. FALSE
7. The MB ratio is a popular metric used to determine the relationship between the
market price of a stock and its earnings power as measured by earnings per share.
FALSE
8. The only ratio that measures return on investment is the return on common equity.
FALSE
9. The benchmark used in cross-sectional analysis is the prior performance of the
firm currently undergoing analysis. FALSE
10. A firm “cannibalizes” its revenue when it adds additional store locations into an
area in which the firm already has existing stores. TRUE
11. The benchmark used in trend analysis is a given firm’s performance over a period
of time. TRUE
12. When analyzing revenue growth in trend analysis, often the analyst will not only
look at overall revenue growth rates but also at revenue growth by business
segment. TRUE
13. Cause-of-action analysis is a special kind of evaluation in which the reasons for a
change in a specific item over some period are identified. FALSE
14. In cross-sectional analysis, we compare two or more companies using financial
ratios, and we may also compare the companies’ ratios to an industry average.
TRUE
15. In doing ratio analysis, we must recognize that different firms provide different
levels of disclosure. TRUE
EXERCISE 2: MULTIPLE CHOICE
1. In financial analysis, ratios are used to help us learn about the firm’s:
a. profitability
b. growth and potential for growth
c. resource needs
d. All of the above answers are correct.

2. A ratio that is used to evaluate a firm’s operating margin percentage is classified

as:
a. a specialty ratio
b. an investment ratio
c. a credit ratio
d. an operating ratio

3. A ratio that measures income taxes to revenues is:

a. relatively meaningless since it tells us little about the income tax rate or the
profitability of the firm
b. an excellent metric since it compares the effective rate of income tax to the
profitability of the firm
c. classified as a common investment ratio
d. complimentary to the return on common equity ratio

4. The only operating ratio that uses the cost of sales in its numerator is the:
a. market-to-book ratio
b. quick ratio
c. inventory turnover ratio
d. days payables outstanding ratio

5. An operating ratio, such as the inventory turnover ratio, varies greatly by industry.
An example of a business with a high inventory turnover ratio is a:
a. watch repair shop
b. grocery store
c. jewelry retailer
d. CPA firm

6. To help determine whether a business should extend credit to various other

businesses, an analyst will look at credit ratios. The ratio that measures the speed with
which the firm can pay its obligations with cash, cash equivalents, and short-term
investments is known as the:
a. days payables outstanding ratio
b. debt to capital ratio
c. current ratio
d. quick ratio

7. The denominator in the debt to capital ratio consists of:

a. debt, minority interest, and equity
b. the total obligations of the firm
c. the total equity of the firm
d. net income, common and preferred stock, and retained earnings

8. Investors and managers use the price-to-earnings and market-to-book ratios to:
a. primarily measure business performance
b. primarily screen potential investments
c. measure business performance and screen potential investments
d. track the efficiency of leverage in capital spending in both foreign and
domestic markets

9. The __________ ratio uses net income in its numerator while the __________
ratio uses diluted earnings per share in its denominator.
a. return on common equity; market-to-book
b. return on common equity; price-to earnings
c. return on capital; market-to-book
d. return on capital; price-to-earnings

10. A ratio has little meaning until it is compared to a benchmark. Financial analysts
use several common benchmarks to help them better understand and interpret
financial ratios. The benchmark in which ratios from several different companies or
an industry segment are analyzed is known as a:
a. cross-sectional analysis
b. trend analysis
c. cause-of-change analysis
d. cause-of-action analysis

11. A thorough financial analysis includes any adjustments to the financial statements
that are necessary to develop useful forecasts. Such forecasts are used in the analyst’s
valuation work. An example of an adjustment made to understand a business more
completely for purposes of valuation is to:
a. change financial statement items even though such adjustment may not be per GAAP
b. change financial statement items that may incorporate accounting policies different
than that of the firm
c. exclude a financial statement item such as joint venture income
d. All of the answers above are correct.
12. An analyst can restate each item on an income statement as a percentage of
revenues. This will afford the analyst an opportunity to factor out size differences
among statements of various firms. What is this restatement known as and with which
method can it be used?
a. change of accounting principle restatement; cross-sectional analysis only
b. change of accounting principle restatement; trend or cross-sectional analysis
c. common-size income statement; trend or cross-sectional analysis
d. common-size income statement; trend analysis only

13. Identify the ratio that cannot be computed given the following information for a
firm: Current assets are P475,806; current liabilities are P257,814; cash is P89,774;
earnings before interest and taxes is P72,005; short-term investments, P145,850;
equity, P192,615; minority interest, P0; interest expense, P47,899.
a. current
b. quick
c. debt to capital
d. interest coverage

14. Identify the ratio that can be computed given the following information for a firm:
Current assets are P475,806; current liabilities are P257,814; cash is P89,774;
earnings before taxes is P72,005; short-term investments, P145,850; equity at end of
period, P192,615; minority interest, P0; income taxes, P11,211; interest expense,
P47,899.
a. return on capital
b. effective income tax rate
c. gross margin percentage
d. inventory turnover

15. Identify the ratio that cannot be computed given the following information for a
firm: Diluted earnings per share, P3.57; market price of the firm’s stock, P47.75;
average common equity, P879,550; net income, P99,772; average total capital,
P625,740; aftertax interest expense, P14,885.
a. price-earnings
b. market-to-book
c. return on common equity
d. return on capital

16. A firm has the following growth rates for the last four years: 2000, 39.8%; 2001,
34.2%; 2002, 28.4%; 2003, 29.1%. From a standpoint of trend analysis, what
conclusion might an analyst reach regarding the firm’s revenue growth?
a. The trend analysis indicates the firm has had flat revenue growth over time.
b. The trend analysis indicates the firm has had diminished revenue growth over time.
c. The trend analysis indicates the firm has had moderately increasing revenue growth
over time.
d. The trend analysis indicates the firm has had significant, but slowing, revenue
growth over time.

17. There are two key ratios that measure operating profitability. The numerator for
the __________ ratio uses income while the __________ ratio uses revenues less cost
of goods sold in its computation.
a. gross margin percentage; operating margin percentage
b. operating margin percentage; gross margin percentage
c. quick; operating margin percentage
d. current; gross margin percentage

18. There are two key ratios that measure operating profitability. The numerator for
the __________ ratio uses income while the __________ ratio uses revenues less cost
of goods sold in its computation.
a. gross margin percentage; operating margin percentage
b. operating margin percentage; gross margin percentage
c. quick; operating margin percentage
d. current; gross margin percentage

19. The analyst must exercise caution when using ratios as part of the analysis of a
firm. The fact that ratios often vary across industries is an example of what is called:
a. an accounting method discrepancy
b. an industry and business difference
c. a business environment change
d. an ambiguous ratio definition

35. Select the answer that best fits this statement, “Analysts define ratios differently.”
a. What some analysts call trend analysis others call cross-sectional analysis.
b. What some analysts call the current ratio is called the quick ratio by others.
c. The numerator used in the return on capital ratio may vary.
d. The income statement is restated in non-GAAP terms.

36. Ratios often aid analysts to project the future. Such projections require the adjustment
of certain items found on the financial statements. One such item that should be
adjusted in such a projection is:
a. removing an extraordinary item from the income statement
b. removing revenue from the income statement
c. the earnings-per-share calculation when there are no dilutive or anti-dilutive items
d. the reconciliation of cash on the balance sheet
PROBLEMS
1. Following are data about Blite Company
Average total assets P150,000
Average owner’s equity 60,000
Net income after interest but before tax 10,000
Bonds payable, 8% 50,000
Income tax rate 35%
Calculate the following ratios.
1. Times interest earned
10,000/3,500 = 2.86 times
2. Return on equity
6,500/60,000 = 0.11
3. Return on assets
10,000/150,000 = 0.07
4. Basic earnings power ratio
10,000/60,000 = 0.17

2. Below are data about Loi Merchandising Company:

Sales P500,000
Cost of goods sold 200,000
Average inventory 20,000
Average receivable 30,000
Compute the following:
a. Inventory turnover
200,000/20,000 = 10 times
b. Receivable turnover
500,000/30,000 = 16.67 times
c. Average age of accounts receivable
365/16.67 = 21.90 days
d. Average age of inventory
365/10 = 36.5 days
e. Operating cycle
21.90 + 36.5 = 58.4 days

3. Estrada Inc. is concerned about the level of its advertising and office salaries expense.
Selected statement of comprehensive income data from 2016 – 2018 appear below:
2018 2017 2016
Sales P140,000 P60,000 P37,500
Gross Profit 89,600 37,200 22,500
Advertising Expense 7,000 3,300 2,250
Office Salaries 22,400 9,000 4,500
Profit 30,800 13,800 9,000

4. The following information was taken from the statement of financial position of Blanche
Corporation:
 Cash P13,250
Accounts Receivable (net) 33,000
Merchandise Inventory 40,000
Prepaid Expenses 9,950
Accounts Payable 25,200
Accrued Payables 1,800
Notes Payable (due in 6 months) 10,000
Calculate the working capital, current ratio and quick ratio

Working Capital
13,250 + 33,000 + 40,000 + 9,950 = 96,200
25,200 + 1,800 + 10,000 = 37,000
96,200 – 37,000 = 59,200
Current Ratio
96,200 / 37,000 = 2.6 is to 1
Quick Ratio
13,250 + 33,000 = 46,250
46,250 / 37,000 = 1.25 is to 1

5. The following data are available from Gumban’s annual report:

Beginning Merchandise Inventory P 245,000
Ending Merchandise Inventory 375,000
Beginning Accounts Receivable 250,000
Ending Accounts Receivable 297,000
Cost of Goods Sold 2,480,000
Cash Sales 1,000,000
Total Sales 5,100,000
Gumban’s Credit Terms Net 30 days

Required:
1. Calculate inventory turnover and accounts receivable turnover
Inventory Turnover
245,000 + 375,000 = 620,000/2 = 310,000
2,480,000 / 310,000 = 8
Accounts Receivable Turnover
250,000 + 297,000 = 547,000 / 2 = 273,500
4,100,000 / 273,500 = 14.99
2. In your opinion, is Gumban doing a good job in receivables? Explain.

Horizontal analysis
6. Kline Corporation had net income of P2 million in 2016. Using the 2016 financial elements as
the base data, net income decreased by 70 percent in 2017 and increased by 175 percent in 2018.
The respective net income reported by Kline Corporation for 2017 and 2018 are:
A. P 600,000 and P5,500,000 C. P1,400,000 and P3,500,000
B. P5,500,000 and P 600,000 D. P1,400,000 and P5,500,000
7. Assume that Axle Inc. reported a net loss of P50,000 in 2016 and net income of P250,000 in
2017. The increase in net income of P300,000:
A. can be stated as 0% C. cannot be stated as a percentage
B. can be stated as 100% increase D. can be stated as 200% increase

Liquidity ratios
8. The following financial data have been taken from the records of Ratio Company:
Accounts receivable P200,000
Accounts payable 80,000
Bonds payable, due in 10 years 500,000
Cash 100,000
Interest payable, due in three months 25,000
Inventory 440,000
Land 800,000
Notes payable, due in six months 250,000
What will happen to the ratios below if Ratio Company uses cash to pay 50 percent of its
accounts payable?
A. B. C. D.
Current Increase Decrease Increase Decrease
ratio
Acid-test Increase Decrease Decrease Increase
ratio

Question Nos. 9 through 11 are based on the data taken from the balance sheet of Nomad
Company at the end of the current year:
Accounts payable P145,000
Accounts receivable 110,000
Accrued liabilities 4,000
Cash 80,000
Income tax payable 10,000
Inventory 140,000
Marketable securities 250,000
Notes payable, short-term 85,000
Prepaid expenses 15,000

9. The amount of working capital for the company is:

A. P351,000 C. P211,000
B. P361,000 D. P336,000

10. The company’s current ratio as of the balance sheet date is:
A. 2.67:1 C. 2.02:1
B. 2.44:1 D. 1.95:1

11. The company’s acid-test ratio as of the balance sheet date is:
 A. 1.80:1 C. 2.02:1
B. 2.40:1 D. 1.76:1

Activity ratios
Receivables turnover
12. Pine Hardware Store had net credit sales of P6,500,000 and cost of goods sold of
P5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the
year were P600,000 and P700,000, respectively. The receivables turnover was
A. 7.7 times. C. 9.3 times.
B. 10.8 times. D. 10.0 times.

13. Milward Corporation’s books disclosed the following information for the year ended
December 31, 2017:
Net credit sales P1,500,000
Net cash sales 240,000
Accounts receivable at beginning of year 200,000
Accounts receivable at end of year 400,000
Milward’s accounts receivable turnover is
A. 3.75 times C. 5.00 times
B. 4.35 times D. 5.80 times

Days receivable
14. Batik Clothing Store had a balance in the Accounts Receivable account of P390,000 at the
beginning of the year and a balance of P410,000 at the end of the year. The net credit sales
during the year amounted to P4,000,000. Using 360-day year, what is the average collection
period of the receivables?
A. 30 days C. 73 days
B. 65 days D. 36 days

Cash collection
15. Deity Company had sales of P30,000, increase in accounts payable of P5,000, decrease in
accounts receivable of P1,000, increase in inventories of P4,000, and depreciation expense of
P4,000. What was the cash collected from customers?
A. P31,000 C. P34,000
B. P35,000 D. P25,000

Inventory turnover
16. During 2017, Tarlac Company purchased P960,000 of inventory. The cost of goods sold
for 2017 was P900,000, and the ending inventory at December 31, 2017 was P180,000. What
was the inventory turnover for 2017?
A. 6.4 C. 5.3
B. 6.0 D. 5.0
17. Selected information from the accounting records of Petals Company is as follows:
Net sales for 2017 P900,000
Cost of goods sold for 2017 600,000
Inventory at December 31, 2016 180,000
Inventory at December 31, 2017 156,000
Petals’ inventory turnover for 2017 is
A. 5.77 times C. 3.67 times
B. 3.85 times D. 3.57 times

18. The Moss Company presents the following data for 2017.
Net Sales, 2017 P3,007,124
Net Sales, 2016 P 930,247
Cost of Goods Sold, 2017 P2,000,326
Cost of Goods Sold, 2017 P1,000,120
Inventory, beginning of 2017 P  341,169
Inventory, end of 2017 P  376,526
The merchandise inventory turnover for 2017 is:
A. 5.6 C. 7.5
B. 15.6 D. 7.7

19. Based on the following data for the current year, what is the inventory turnover?
Net sales on account during year P 500,000
Cost of merchandise sold during year 330,000
Accounts receivable, beginning of year 45,000
Accounts receivable, end of year 35,000
/16
Inventory, end of year 110,000
A. 3.3 C. 3.7
B. 8.3 D. 3.0

Days inventory
20. Selected information from the accounting records of Eternity Manufacturing Company
follows:
Net sales P3,600,000
Cost of goods sold 2,400,000
Inventories at January 1 672,000
Inventories at December 31 576,000
What is the number of days’ sales in average inventories for the year?
A. 102.2 C. 87.6
B. 94.9 D. 68.1

Turnover ratios
Asset turnover
Asset
21. Net sales are P6,000,000, beginning total assets are P2,800,000, and the asset turnover is 3.0.
What is the ending total asset balance?
A. P2,000,000. C. P2,800,000.
B. P1,200,000. D. P1,600,000.

Solvency ratios
Debt ratio
22. Jordan Manufacturing reports the following capital structure:
Current liabilities P100,000
Long-term debt 400,000
Deferred income taxes 10,000
Preferred stock 80,000
Common stock 100,000
Premium on common stock 180,000
Retained earnings 170,000
What is the debt ratio?
A. 0.48 C. 0.93
B. 0.49 D. 0.96

Times interest earned

23. House of Fashion Company had the following financial statistics for 2016:
Long-term debt (average rate of interest is 8%) P400,000
Interest expense 35,000
Net income 48,000
Income tax 46,000
Operating income 107,000
What is the times interest earned for 2016?
A. 11.4 times C. 3.1 times
B. 3.3 times D. 3.7 times

24. Brava Company reported the following on its income statement:

Income before taxes P400,000
Income tax expense 100,000
Net income P300,000
An analysis of the income statement revealed that interest expense was P100,000. Brava
Company’s times interest earned (TIE) was
A. 5 times C. 3.5 times
B. 4 times D. 3 times

25. The balance sheet and income statement data for Candle Factory indicate the following:
 Bonds payable, 10% (issued 1998 due 2022) P1,000,000
Preferred 5% stock, P100 par (no change during year) 300,000
Common stock, P50 par (no change during year) 2,000,000
Income before income tax for year 350,000
Income tax for year 80,000
Common dividends paid 50,000
Preferred dividends paid 15,000
Based on the data presented above, what is the number of times bond interest charges were
earned (round to one decimal point)?
A. 3.7 C. 4.5
B. 4.4 D. 3.5

26. The following data were abstracted from the records of Johnson Corporation for the year:
Sales P1,800,000
Bond interest expense 60,000
Income taxes 300,000
Net income 400,000
How many times was bond interest earned?
A. 7.67 C. 12.67
B. 11.67 D. 13.67

Net income

27. The times interest earned ratio of Mikoto Company is 4.5 times. The interest expense for
the year was P20,000, and the company’s tax rate is 40%. The company’s net income is:
A. P22,000 C. P54,000
B. P42,000 D. P66,000

Profitability Ratios
Return on Common Equity
28. Selected information for Ivano Company as of December 31 is as follows:
2016 2017
Preferred stock, 8%, par P100, P250,000 P250,000
nonconvertible, noncumulative
Common stock 600,000 800,000
Retained earnings 150,000 370,000
Dividends paid on preferred stock for the 20,000 20,000
year
Net income for the year 120,000 240,000
Ivano’s return on common stockholders’ equity, rounded to the nearest percentage point, for
2017 is
A. 17% C. 21%
B. 19% D. 23%
Dividend yield
29. The following information is available for Duncan Co.:
2016
Dividends per share of common stock P 1.40
Market price per share of common stock 17.50
Which of the following statements is correct?
A. The dividend yield is 8.0%, which is of interest to investors seeking an increase in market
price of their stocks.
B. The dividend yield is 8.0%, which is of special interest to investors seeking current
returns on their investments.
C. The dividend yield is 12.5%, which is of interest to bondholders.
D. The dividend yield is 8.0 times the market price, which is important in solvency
analysis.

Market Test Ratios

Market/Book value ratio
Price per share
30. What is the market price of a share of stock for a firm with 100,000 shares outstanding, a
book value of equity of P3,000,000, and a market/book ratio of 3.5?
A. P8.57 C. P85.70
B. P30.00 D. P105.00

P/E ratio
31. Orchard Company’s capital stock at December 31 consisted of the following:
 Common stock, P2 par value; 100,000 shares authorized, issued, and outstanding.
 10% noncumulative, nonconvertible preferred stock, P100 par value; 1,000 shares
authorized, issued, and outstanding.
Orchard’s common stock, which is listed on a major stock exchange, was quoted at P4 per
share on December 31. Orchard’s net income for the year ended December 31 was P50,000.
The yearly preferred dividend was declared. No capital stock transactions occurred. What
was the price earnings ratio on Orchard’s common stock at December 31?
A. 6 to 1 C. 10 to 1
B. 8 to 1 D. 16 to 1

32. On December 31, 2016 and 2017, Renegade Corporation had 100,000 shares of common
stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and
outstanding.
Additional information:
Stockholders’ equity at 12/31/07 P4,500,000
Net income year ended 12/31/07 1,200,000
Dividends on preferred stock year ended 12/31/07 300,000
Market price per share of common stock at 12/31/07 144
The price-earnings ratio on common stock at December 31, 2017, was
 A. 10 to 1 C. 14 to 1
B. 12 to 1 D. 16 to 1

Payout ratio
33. Selected financial data of Alexander Corporation for the year ended December 31, 2017, is
presented below:
Operating income P900,000
Interest expense (100,000)
Income before income taxes 800,000
Income tax (320,000)
Net income 480,000
Preferred stock dividend (200,000)
Net income available to common stockholders 280,000
Common stock dividends were P120,000. The payout ratio is:
A. 42.9 percent C. 25.0 percent
B. 66.7 percent D. 71.4 percent

P/E ratio & Payout ratio

Use the following information for question Nos. 33 and 34:
Terry Corporation had net income of P200,000 and paid dividends to common stockholders of
P40,000 in 2017. The weighted-average number of shares outstanding in 2017 was 50,000
shares. Terry Corporation’s common stock is selling for P60 per share in the local stock
exchange.

34. Terry Corporation’s price-earnings ratio is

A. 3.8 times C. 18.8 times
B. 15 times D. 6 times

35. Terry Corporation’s payout ratio for 2017 is

A. P4 per share C. 20.0 percent
B. 12.5 percent D. 25.0 percent

Integrated ratios
Liquidity & activity ratios
Inventory
36. The current assets of Mayon Enterprise consists of cash, accounts receivable, and
inventory. The following information is available:
Credit sales 75% of total sales
Inventory turnover 5 times
Working capital P1,120,000
Current ratio 2.00 to 1
Quick ratio 1.25 to 1
Average Collection period 42 days
Working days 360
 The estimated inventory amount is:
A. 840,000 C. 720,000
B. 600,000 D. 550,000

37. The following data were obtained from the records of Salacot Company:
Current ratio (at year end) 1.5 to 1
Inventory turnover based on sales and ending inventory 15 times
Inventory turnover based on cost of goods sold and ending inventory 10.5 times
Gross margin for 2017 P360,000
What was Salacot Company’s December 31, 2017 balance in the Inventory account?
A. P120,000 C. P 80,000
B. P 54,000 D. P 95,000

Net sales
38. Selected data from Mildred Company’s year-end financial statements are presented below.
The difference between average and ending inventory is immaterial.
Current ratio 2.0
Quick ratio 1.5
Current liabilities P120,000
Inventory turnover (based on cost of sales) 8 times
Gross profit margin 40%
Mildred’s net sales for the year were
A. P 800,000 C. P 480,000
B. P 672,000 D. P1,200,000

Gross margin
39. Selected information from the accounting records of the Blackwood Co. is as follows:
Net A/R at December 31, 2016 P 900,000
Net A/R at December 31, 2017 P1,000,000
Accounts receivable turnover 5 to 1
Inventories at December 31, 2016 P1,100,000
Inventories at December 31, 2017 P1,200,000
Inventory turnover 4 to 1
What was the gross margin for 2017?
A. P150,000 C. P300,000
B. P200,000 D. P400,000
Market Test Ratio
Dividend yield
40. Recto Co. has a price earnings ratio of 10, earnings per share of P2.20, and a pay out ratio
of 75%. The dividend yield is
A. 25.0% C. 7.5%
B. 22.0% D. 10.0%

41. The following were reflected from the records of Salvacion Company:
Earnings before interest and taxes P1,250,000
Interest expense 250,000
Preferred dividends 200,000
Payout ratio 40 percent
Shares outstanding throughout 2016
Preferred 20,000
Common 25,000
Income tax rate 40 percent
Price earnings ratio 5 times
The dividend yield ratio is
A. 0.50 C. 0.40
B. 0.12 D. 0.08

Comprehensive
42. The balance sheets of Magdangal Company at the end of each of the first two years of
operations indicate the following:
2017   2016  
Total current assets P600,000 P560,000
Total investments 60,000 40,000
Total property, plant, and equipment 900,000 700,000
Total current liabilities 150,000 80,000
Total long-term liabilities 350,000 250,000
Preferred 9% stock, P100 par 100,000 100,000
Common stock, P10 par 600,000 600,000
Paid-in capital in excess of par-common 60,000 60,000
stock
Retained earnings 300,000 210,000
Net income is P115,000 and interest expense is P30,000 for 2017.
What is the rate earned on total assets for 2017 (round percent to one decimal point)?
A. 9.3 percent C. 8.9 percent
B. 10.1 percent D. 7.4 percent

ROA: Operating income ÷ Average Total Assets

P145,000 ÷ P1,430,000 = 10.1%
43. What is the rate earned on stockholders' equity for 2017 (round percent to one decimal
point)?
A. 10.6 percent C. 12.4 percent
B. 11.2 percent D. 15.6 percent

Return on stockholders’ equity: Net income ÷ Average stockholders’ equity

P115,000 ÷ P1,027,500 = 11.2%

44. What is the earnings per share on common stock for 2017, (round to two decimal places)?
A. P1.92 C. P1.77
B. P1.89 D. P1.42

Net income P115,000

Deduct Preferred Dividends 9,000
Income available to common shares P106,000

EPS: (P106,000 ÷ 60,000) P1.77