Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden 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:

Modern Building Supply Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	68,000	$	139,000
Marketable securities		0		16,000
Accounts receivable, net		475,000		281,000
Inventory		932,000		585,000
Prepaid expenses		17,000		27,000
Total current assets		1,492,000		1,048,000
Plant and equipment, net		1,610,860		1,486,580
Total assets	$	3,102,860	$	2,534,580
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	815,000	$	439,000
Bonds payable, 11%		610,000		610,000
Total liabilities		1,425,000		1,049,000
Stockholders' equity:
Preferred stock, $25 par, 6%		250,000		250,000
Common stock, $10 par		515,000		515,000
Retained earnings		912,860		720,580
Total stockholders' equity		1,677,860		1,485,580
Total liabilities and stockholder's equity	$	3,102,860	$	2,534,580

Modern Building Supply Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,012,000	$	4,361,000
Cost of goods sold		3,862,000		3,447,000
Gross margin		1,150,000		914,000
Selling and administrative expenses		647,000		540,000
Net operating income		503,000		374,000
Interest expense		67,100		67,100
Net income before taxes		435,900		306,900
Income taxes (30%)		130,770		92,070
Net income		305,130		214,830
Dividends paid:
Preferred dividends		15,000		15,000
Common dividends		97,850		77,250
Total dividends paid		112,850		92,250
Net income retained		192,280		122,580
Retained earnings, beginning of year		720,580		598,000
Retained earnings, end of year	$	912,860	$	720,580

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 Modern 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.)

	This year	Last year
Earnings per share	$	$

b.	The dividend yield ratio for common stock. The companys common stock is currently selling for $40.54 per share; last year it sold for $29.88 per share. (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.)

	This year	Last year
Dividend yield ratio	%	%

c.	The dividend payout ratio for common stock. (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.)

	This year	Last year
Dividend payout ratio	%	%

d.	The price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.)

	This year	Last year
Price-earnings ratio	times	times

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

	This year	Last year
Book value per share	$	$

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 $2,200,000.) (Round your intermediate calculations to whole numbers and final answer to 1 decimal place.)

	This year	Last year
Return on total assets	%	%

b.	The return on common stockholders equity. (Stockholders equity at the beginning of last year was $1,259,000.)(Round your intermediate calculations to whole numbers and final answer to 1 decimal place.)

	This year	Last year
Return on common stockholders' equity	%	%

c.

Is the companys financial leverage positive or negative?

	Positive
	Negative