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	$	59,000	$	138,000
Marketable securities		0		18,000
Accounts receivable, net		476,000		280,000
Inventory		945,000		590,000
Prepaid expenses		16,000		24,000
Total current assets		1,496,000		1,050,000
Plant and equipment, net		1,589,806		1,472,428
Total assets	$	3,085,806	$	2,522,428
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	812,000	$	444,000
Bonds payable, 9%		604,000		604,000
Total liabilities		1,416,000		1,048,000
Stockholders' equity:
Preferred stock, $25 par, 7%		250,000		250,000
Common stock, $10 par		503,000		503,000
Retained earnings		916,806		721,428
Total stockholders' equity		1,669,806		1,474,428
Total liabilities and stockholder's equity	$	3,085,806	$	2,522,428

Modern Building Supply Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,006,000	$	4,355,000
Cost of goods sold		3,871,000		3,442,000
Gross margin		1,135,000		913,000
Selling and administrative expenses		640,000		541,000
Net operating income		495,000		372,000
Interest expense		54,360		54,360
Net income before taxes		440,640		317,640
Income taxes (30%)		132,192		95,292
Net income		308,448		222,348
Dividends paid:
Preferred dividends		17,500		17,500
Common dividends		95,570		70,420
Total dividends paid		113,070		87,920
Net income retained		195,378		134,428
Retained earnings, beginning of year		721,428		587,000
Retained earnings, end of year	$	916,806	$	721,428

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 $39.88 per share; last year it sold for $34.60 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 $2,210,000.) (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 $1,309,000.)(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