In recent years the fast-food chain Wendy€™s International has purchased many treasury shares. From December 28, 2003, to December 31, 2006, the number of shares outstanding has fallen from 115 million to 96 million. The following information was drawn from the company€™s financial statements (in millions).

Instructions
Use the information provided to answer the following questions.
(a) Compute earnings per share, return on common stockholders€™ equity, and return on assets for both years. Discuss the change in the company€™s profitability over this period.
(b) Compute the dividend payout ratio. Also compute the average cash dividend paid per share of common stock (dividends paid divided by the average number of common shares outstanding). Discuss any change in these ratios during this period and the implications for the company€™s dividend policy.
(c) Compute the debt to total assets ratio and times interest earned. Discuss the change in the company€™s solvency.
(d) Based on your findings in (a) and (c), discuss to what extent any change in the return on common stockholders€™ equity was the result of increased reliance ondebt.

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Year ended Dec. 31, 2006 Net income Total assets Average total asscts Total common stockholders' cquity Average common stockholders' cquity Total liabilitics Average total liabilities Interest expense Incomc taxes Cash provided by operations Cash dividends paid on common stock Preferred stock dividends Average number of common shares outstanding S 94.3 2,060.3 2,750.3 1,011.7 1,535.1 1,048.7 1,215.2 35.7 5.4 271.4 69.7 Dec. 28, 2003 236.0 3,164.0 2,943.7 1,758.6 1,603.6 1,405.4 1,340.1 45.8 141.6 430.2 27.3 0 0 113.9 114.2