(Dividend Policy Analysis) Remmers 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 Remmers Inc. operations.

Instructions

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

(b) Compute the rate of return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Remmers Inc.

(c) Comment on the appropriateness of declaring a cash dividend at this time, using the ratios.com- puted in part

(b) as a major factor in your analysis.