Finance P9-13 Leverage Net EPS P/E %

Finance P9-13 Leverage net EPS P/E % Earnings Retained Div Payout Div Yield BV/share 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 2010 2009 Leverage P/E % Earnings Retained Dividend yield Common Stock Auth Common Stock Issued 7585764 7582347 Treasury Stock 2525174 2482233 Common Stock out 5060590 5100114 BV/Share $23.73 $22.43 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, this company has a low dividend yield. On the 2009 and 2010 income statements there are two special items: Gain on sale of assets and litigation settlement.

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 19 + Depreciation 10 + Decrease in CA 2 +Increase in CL 1 Net Cash Flow Operating 32 less Div 21 11 Direct Method Cash Receipts from customers Cash Payments to suppliers income tax 12 Net Cash Flow Operating 3 less Div 21 Change in Cash Flow -18 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. b.

Problem 10-9 Current Ratio 6 Acid Test Ratio 3.7 OCF/Current Mats 2.55 Cash Ratio 0.9 x Int earned 5.25 Debt ratio 48.62% ROA 7.59% ROE 14.87% 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 is the reason for the strength of the company's liquidity. f. With a debt ratio of less than half, Zaro is in a pretty good debt position. Almost.