Finance P9-13 Leverage Net EPS P/E  Other

Length: 2 pages Sources: 1 Subject: Business Type: Other Paper: #60104514 Related Topics: Costco, Income Statement, Cash Flow, Litigation
Excerpt from Other :




net EPS


% Earnings Retained

Div Payout

Div Yield


Materiality of options

There was no book value data provide for 2008 & 2007. No data was provided on options expense, so materiality of options could not be calculated. From the perspective of an investor, this company appears to have fairly low leverage, trades at a low multiple, has a very stable business value and pays out most of its earnings as dividends, so you are buying the NPV of future dividends and should have relatively little expectation of capital gains. Like a lot of companies, it took a hit in 2009 and has been building up to normal operating levels ever since.

Case 9-4.

Case 9-4





% Earnings Retained

Dividend yield

Common Stock Auth

Common Stock Issued



Treasury Stock



Common Stock out






The ratios calculated show how the amount of stock that exists on the market can differ according to different variables- what has been authorized, what has been issued, and even what stock has been bought back and is in Treasury. Otherwise,...


These should not be included in the ongoing operations portion of the income statement prior to the operating profit line. Instead, they should be on the income statement below operating profit, so that the operating profit in these two years can be more accurately compared. They wouldn't be removed from net earnings, because they are charges that will lower the value of the company, but they are not operating expenses.

Problem 10-6

Problem 10-6

Indirect Method

Net Income


+ Depreciation


+ Decrease in CA


+Increase in CL


Net Cash Flow Operating


less Div



Direct Method

Cash Receipts from customers

Cash Payments to suppliers income tax


Net Cash Flow Operating


less Div


Change in Cash Flow


The items in the statement of cash flows are the cash flows.

Problem 10-9

a. The statement of cash flows shows the cash flows for Zaro company for 2011. Looks like the indirect method.


Problem 10-9

Current Ratio


Acid Test Ratio


OCF/Current Mats


Cash Ratio


x Int earned


Debt ratio






e. The liquidity for Zaro is exception. A 0.9 cash ratio is very good. The current ratio is very high. The very low level of current liabilities…

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