Merck, a major pharmaceutical, generated $6,168 million in net income for the year ended December 31, 2012.

Question:

1. The company declared and paid $5,173 million in dividends during 2012.

2. Merck stock was selling for $38.30 per share on January 1, 2012, and for $40.94 per share on December 31, 2012.

3. As of January 1, 2012, the company had 3,041 million shares of common stock outstanding. During 2012, the company repurchased 14.4 million shares. Assume that the purchases were made evenly throughout the year.

a. Compute the following ratios:

(1) Earnings per share

(2) Price/earnings

(3) Dividend yield

(4) Stock price return

b. What effect (increase, decrease, or no effect) did each of the three events above have on Merck’s return on equity ratio?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...