Compute rate of return on assets and profit margin on sales

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Reference no: EM131098800

Dividend Policy Analysis Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc. operations.

(a) Suggest factors to be considered by the board of directors in establishing a dividend policy.

(b) Compute the rate of return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Matheny Inc.

(c) Comment on the appropriateness of declaring a cash dividend at this time, using the ratios computed in part (b) as a major factor in your analysis.

 

2011

2010

2009

2008

2007

Sales

$20,000

$16.000

$14,000

$6,000

$4,000

Net Income

2.400

1,400

800

700

250

Average total assets

22,000

19,000

11,500

4,200

3,000

Current assets

8,000

6,000

3.000

1,200

1,000

Working capital

3,600

3,200

1,200

500

400

Common shares:

 

 

 

 

 

Number of shares outstanding (000)

2,000

2,000

2,000

20

20

Average market price

$9

$8

$4

-

-

Reference no: EM131098800

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