Selected data for Hoback Company for 2018 and additional information on industry averages follow:
Earnings (net income)........................................................................ $120,000
Preferred stock (16,000 shares at $17.50 par, 6%)....................................... $280,000
Common stock (40,500 shares no par, market value $15.20)............................ 342,000
Retained earnings.............................................................................. 240,000
.....................................................................................................862,000
Less: Treasury stock
Preferred (1,000 shares)............................................ $14,400
Common (500 shares)................................................. 6,400................ 20,800
Total stockholders' equity................................................................ $841,200
Industry averages
Earnings per share.......................... $2.00
Price-earnings ratio.......................... 8.00
Return on equity........................... 7.30%
Required
Round computations to two decimal points.
a. Calculate and compare Hoback Company's ratios with the industry averages.
b. Discuss factors you would consider in deciding whether to invest in the company.