Matheny Inc. 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. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc. operations.

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 Inc.

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

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($000 omitted) 2019 2018 2021 2017 2020 Sales revenue Net income Average total assets Current assets Working capital Common shares: Number of shares outstanding (000) Average market price $14,000 $20,000 2,400 $16,000 $6,000 $4,000 1,400 800 700 3,000 4,200 250 22,000 19,000 6,000 3,200 11,500 3,000 1,000 400 8,000 3,600 1,200 500 1,200 2,000 2,000 2,000 20 20 $9 $6 $4