Harley-Davidson, lnc., is a leading motorcycle manufacturer in the United States. The company manufactures and sells a number of different types of motorcycles, a complete line of motorcycle parts, and brand-related accessories, clothing, and collectibles. In recent years, Harley-Davidson has attempted to expand its dealer network and product lines internationally.

The following information is available for three recent years (in millions except pershare amounts):

1. Calculate the following ratios for each year:

a. Rate earned on total assets

b. Rate earned on stockholders’ equity

c. Earnings per share

d. Dividend yield

e. Price-earnings ratio

2. What is the ratio of average liabilities to average stockholders’ equity for 2006?

3. Explain the direction of the dividend yield and price-earnings ratio in light of Harley-Davidson’s profitability trend.

4. Based on these data, evaluate Harley-Davidson’s strategy to expand to international markets.

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2006 2005 2004 Net income (loss) Preferred dividends Interest expense Shares outstanding for computing earnings per share Cash dividend per share Average total assets Average stockholders' equity Average stock price per share $761 $960 $0.00 $36.15 $890 $0.00 $22.72 $0.00 $17.64 280 295 $0.41 $5,203 302 $0.20 $4,392 $2,595 $46.87 $0.63 $5,369 $3,151 $56.12 $3,088 $54.14