Selected data for Dalton Company for 2018 and additional information on industry averages follow:
Earnings (net income).............................................................. $ 97,800
Preferred stock (13,200 shares at $25 par, 4%).................................$330,000
Common stock (45,000 shares no par, market value $28).....................255,000
Retained earnings....................................................................281,250
........................................................................................$866,250
Less: Treasury stock
Preferred (1,800 shares).................................. $27,000
Common (1,800 shares)................................... 12,000................. 39,000
Total stockholders' equity....................................................... $827,250
Industry averages
Earnings per share .................$ 2.60
Price-earnings ratio................. 9.50
Return on equity................. 11.20%
Required
a. Calculate and compare Dalton Company's ratios with the industry averages.
b. Discuss factors you would consider in deciding whether to invest in the company.