Consecutive five-year balance sheets and income statements of Do

Consecutive five-year balance sheets and income statements of Donna Szabo Corporation are shown below and on the following page.

Required

a. Compute or determine the following for the years 2005–2009:

1. Degree of financial leverage

2. Earnings per common share

3. Price/earnings ratio

4. Percentage of earnings retained

5. Dividend payout

6. Dividend yield

7. Book value per share

8. Materiality of options (use stock options outstanding)

b. Comment from the perspective of an investor.

Additional data:

1. Preferred stock dividends (in thousands):

2009 .....$3,920

2008 .....$6,100

2007 .....$6,400

2006 .....$6,600

2005 .....$6,000

2. Common shares outstanding, 29,000,000 (actual) (2005–2009)

3. Stock options outstanding, 1,000,000 (actual) (2005–2009)

4. Dividends per common share (actual):

2009 .....$3.16

2008 .....$2.29

2007 .....$2.10

2006 .....$2.93

2005 .....$2.80

5. Market price per common share (actual):

2009 .....$24.00

2008 .....$22.00

2007 .....$21.00

2006 .....$37.00

2005 .....$29.00


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