4. Calculate the following ratios for each of the three years presented in the stockholders’ equity statement: a. Divid

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4. Calculate the following ratios for each of the three years presented in the stockholders’ equity statement:
a. Dividend payout ratio = Total cash dividends paid on common stock/Net Income
0.00 0.00
0.00
current year (2018) last year(2017)
two years ago (2016)
b. Dividend yield = Dividends paid per share
Stock price at year-end
0.00 0.00
0.00
current year last year
two years ago
c. Earnings per share (provided in income statement)
$500 millions $493 millions
$484 millions
current year last year
two years ago
d. Price-earnings ratio = Market price per share of stock Earnings per share
74.58 190.16 153.03
current year last year two years ago
e. Return on common stockholders’ equity = You will find prior years’ stockholders’ equity in the Five-Year Summary of Selected Financial Data.
Current year(2018) Prior year(2017)
27.02% 12.47%
5. Explain what information each of these ratios provides. Use complete sentences.
(a) The dividend payout ratio measures how much money a company returns to shareholders versus how much it keeps on hand to reinvest in growth, pay off debt, or build cash reserves (retained earnings).
(b)The dividend yield shows how much a company has paid out in dividends over the course of a year.
(c)Earnings per share (EPS) serves as an indicator of a company's profitability. It is common for a company to report EPS that is adjusted for extraordinary items and potential share dilution.
(d)The price/earnings ratio, also called the P/E ratio, tells investors how much a company is worth.
(e)Return on common stockholder’s equity is a measure of how well a company uses its investment dollars to generate profits. It tells common stock investors how effectively their capital is being reinvested.
8. Based on the ratios computed in question 4 and your understanding of their meaning as indicated in question 5, evaluate the company’s stock as an investment. Refer to each of the ratios in your discussion.