Reference no: EM13328809

Problem 

Over the years, Donna Dow has been a very successful investor. She investigates a company thoroughly before purchasing its shares. Donna is interested in the common stock of IBU Computers Limited. The following data are available for the company:

2013	2012	2011
Current ratio*	1.9	2.0	2.1
Acid-test ratio	1.1	1.0	.9
Accounts receivable turnover	3.6X	3.5X	3.0X
Inventory turnover	4X	5X	6X
Current liabilities	$1M	$1M	$1M
Sales	$10M	$10M	$10M
Gross Profit Ratio	30%	30%	30%
Dividends paid per share**	$4	$3	$2.50
Dividend yield ratio	5.5%	5.5%	5.5%
Dividend payout ratio	40%	40%	40%
Return on total assets	10%	12%	8%
Return on common stockholders equity	8%	14.5%	9%

* Current assets consist of cash, accounts receivable, and inventory.

**There were no changes in common stock outstanding over the three-year period.

Donna would like answers to a number of specific questions regarding this data. Respond in a complete but concise manner to each of her questions.

1. Is the market price of the company's stock going up or down?,
2. Is the earnings per share increasing or decreasing?
3. Is the company employing financial leverage to the advantage of the common stockholders?
4. Is it becoming easier for the company to pay its bills as they come due?
5. Are customers paying their bills at least as fast now as they did in Year 1?
6. Is the total of accounts receiving increasing, decreasing, or remaining constant?
7. Is the level of inventory increasing, decreasing, or remaining constant?