Kris Building Supply sells various building materials to retail outlets. The company has just approached Kingston State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The companys financial statements for the most recent two years follow:

Kris Building Supply Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	58,000	$	137,000
Marketable securities		0		14,000
Accounts receivable, net		464,000		291,000
Inventory		944,000		585,000
Prepaid expenses		16,000		25,000
Total current assets		1,482,000		1,052,000
Plant and equipment, net		1,640,410		1,497,555
Total assets	$	3,122,410	$	2,549,555
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	815,000	$	433,000
Bonds payable, 9%		620,000		620,000
Total liabilities		1,435,000		1,053,000
Stockholders' equity:
Preferred stock, $25 par, 7%		277,500		277,500
Common stock, $10 par		504,000		504,000
Retained earnings		905,910		715,055
Total stockholders' equity		1,687,410		1,496,555
Total liabilities and stockholder's Equity	$	3,122,410	$	2,549,555

Kris Building Supply Comparative Income Statement and Reconciliation
		This Year		Last Year
Sales	$	5,017,000	$	4,361,000
Cost of goods sold		3,873,000		3,446,000
Gross margin		1,144,000		915,000
Selling and administrative expenses		651,000		542,000
Net operating income		493,000		373,000
Interest expense		55,800		55,800
Net income before taxes		437,200		317,200
Income taxes (30%)		131,160		95,160
Net income		306,040		222,040
Dividends paid:
Preferred dividends		19,425		19,425
Common dividends		95,760		70,560
Total dividends paid		115,185		89,985
Net income retained		190,855		132,055
Retained earnings, beginning of year		715,055		583,000
Retained earnings, end of year	$	905,910	$	715,055

During the past year, the company has expanded the number of lines that it carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. All sales are on account.

Assume that the following ratios are typical of companies in the building supply industry:

Current ratio	2.5
Acid-test ratio	1.2
Average collection period	18	days
Average sale period	50	days
Debt-to-equity ratio	0.75
Times interest earned ratio	6.0
Return on total assets	10	%
Price-earnings ratio	9

Assume that you have just inherited several hundred shares of Kris Building Supply stock. Not being acquainted with the company, you decide to do some analytical work before making a decision about whether to retain or sell the stock you have inherited.

Required:
1.	You decide first to assess the well-being of the common stockholders. For both this year and last year, compute the following:

a.	The earnings per share. (Round your answers to 2 decimal places.)

Earnings per shere? this year______________ last year__________

b.	The dividend yield ratio for common stock. The companys common stock is currently selling for $38 per share; last year it sold for $33 per share. (Do not round intermediate calculations. Round your final answers to 1 decimal place.) Dividen yield Ratio? this year________% Lst year_____%

c.	The dividend payout ratio for common stock. (Do not round intermediate calculations. Round your final answers to 1 decimal place.) Dividen perout Ratio? this year________% Lst year_____%

d.	The price-earnings ratio. (Do not round intermediate calculations. Round your final answers to 1 decimal place.) Price-earning Ratio? this year_______Times Lsst year______times

e.	The book value per share of common stock. (Round your answers to 2 decimal places.)

Book Value per share? this year______________last year_________

2.	You decide next to assess the companys rate of return. Compute the following for both this year and last year:

a.	The return on total assets. (Total assets at the beginning of last year were $2,220,000.) (Do not round intermediate calculations. Round your final answers to 1 decimal place.)

return on total assets? this year__________ last year_________

b.	The return on common stockholders equity. (Stockholders equity at the beginning of last year was $1,269,000.) (Do not round intermediate calculations. Round your final answers to 1 decimal place.)

Return on total assets? this year_________% last year_____________%

c.

Is the companys financial leverage positive or negative?

	Positive
	Negative