Matheny AG went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. No share or cash dividend has ever been declared. Presented below is a brief financial summary of Matheny AG operations (euros in thousands).

Instructions

a. Suggest factors to be considered by the board of directors in establishing a dividend policy.

b. Compute the return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Matheny AG.

c. Comment on the appropriateness of declaring a cash dividend of €0.20 per share at this time, using the ratios computed in part (b) as a major factor in your analysis.

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2022 2021 2020 2019 2018 Sales revenue €20,000 €16,000 €14,000 €6,000 €4,000 Net income 2,400 1,400 800 700 250 Average total assets 22,000 19,000 11,500 4,200 3,000 Current assets 8,000 6,00o 3,000 1,200 1,000 Working capital Ordinary shares: Number of shares outstanding (in thousands) 3,600 3,200 1,200 500 400 2,000 2,000 2,000 20 20 Average market price €9 €6 €4