How earnings per share might be affected by treasury stock

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Reference no: EM132842524

Question - Kellogg Company is the world's leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg.

(in millions)

Current Year

Prior Year

Net sales

$14,792

$14,580

Net income

1,807

632

Total assets

15,474

15,153

Total liabilities

11,867

12,302

Common stock, $0.25 par value

105

105

Capital in excess of par value

626

678

Retained earnings

6,749

6,689

Treasury stock, at cost

2,999

3,470

Number of shares outstanding

363

358

Required -

a. What are some of the reasons that management purchases its own stock?

b. Explain how earnings per share might be affected by treasury stock transactions.

c. Calculate the debt to assets ratio for the current year and the prior year, and discuss the implications of the change.

Reference no: EM132842524

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