4. Calculate the following ratios for each of the three years presented in the stockholders’ equity statement: a. Divid
Posted: Wed Jul 06, 2022 6:22 am
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.
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.