PROBLEM 16-12 Financial Ratios for Common Stockholders [LOZ Refer to the financial statements and other data in Problem 16-11. Assutne that you have just inherited several hundred shares of Modem Building Supply stock. Not bemg acquainted With the company. ycn. decide to do some analytical work before rnakmg a decision about whether to retain or sell the stock you have inherited RQuied: You decide first to assess the well-being of the cornmon stocholders_ For both this year and last year, cornpute the following: a. b. c. d. e The earnings per share. The dividend yield ratio for cormnon stock. The compmy's stock is currently sell ing for $45 per share: last year it sold for S36 per share The dividend payout ratio for common stock. The pnce-earnmgs ratio. How do investors regard Modern Building Supply as compared to other companies In the industry? Explaiu The value per share of cornmon stock Does the difference between market value and book suggest that the stock at its current price is too high? Explaim 2. You decide next to assess the company 's rate of return. Compute the following for both this year and last year: a. The retum on total assets. (Total assets at the beginning of last year were b. The retum on common stockholders equity. (Stockholders ' equity at the beginning of last year was $1.786.00().) c. Is the company s financial leverage positive or negative? ExplaiL Based on your analytical work (and assuming that you have no immediate need for cash), would you retain sell the stock you have inherited? Explain.