P 9-3 The following information was in the annual report of Rover Company:

2011 2010 2009

Earnings per share $ 1.12 $ 1.20 $ 1.27

Cash dividends per share (common) $ 0.90 $ 0.85 $ 0.82

Market price per share $ 12.80 $ 14.00 $ 16.30

Total common dividends $ 21,700,000 $ 19,500,000 $ 18,360,000

Shares outstanding, end of year 24,280,000 23,100,000 22,500,000

Total assets $1,280,100,000 $1,267,200,000 $1,260,400,000

Total liabilities $ 800,400,000 $ 808,500,000 $ 799,200,000

Nonredeemable preferred stock $ 15,300,000 $ 15,300,000 $ 15,300,000

Preferred dividends $ 910,000 $ 910,000 $ 910,000

Net income $ 31,200,000 $ 30,600,000 $ 29,800,000

Required

a. Based on these data, compute the following for 2011, 2010, and 2009:

1. Percentage of earnings retained

2. Price/earnings ratio

3. Dividend payout

4. Dividend yield

5. Book value per share

b. Discuss your findings from the viewpoint of a potential investor.

P 9-13 Consecutive five-year balance sheets and income statements of Donna Szabo Corporation

are shown below and on the following page.

Required

a. Compute or determine the following for the years 2007?2011:

1. Degree of financial leverage

2. Earnings per common share

3. Price/earnings ratio

4. Percentage of earnings retained

5. Dividend payout

6. Dividend yield

7. Book value per share

8. Materiality of options (use stock options outstanding)

b. Comment from the perspective of an investor.

DONNA SZABO CORPORATION

BALANCE SHEETS

December 31, 2007 through December 31, 2011

(Dollars in thousands) 2011 2010 2009 2008 2007

Assets

Current assets:

Cash $ 26,000 $ 27,000 $ 29,000 $ 28,000 $ 27,000

Accounts receivable, net 125,000 126,000 128,000 130,000 128,000

Inventories 140,000 143,000 145,000 146,000 144,000

Total current assets 291,000 296,000 302,000 304,000 299,000

Property, plant, and

equipment, net 420,000 418,000 417,000 418,000 415,000

Total assets $ 711,000 $ 714,000 $ 719,000 $ 722,000 $ 714,000

Liabilities and Stockholders? Equity

Current liabilities:

Accounts payable $ 120,000 $ 122,000 $ 122,500 $ 124,000 $ 125,000

Income taxes 12,000 13,000 13,500 13,000 12,000

Total current liabilities 132,000 135,000 136,000 137,000 137,000

Long-term debt 90,000 65,000 67,000 68,000 69,000

Dollars in thousands) 2011 2010 2009 2008 2007

Stockholders? equity:

Preferred stock 49,000 76,000 80,000 82,000 75,000

Common stock 290,000 290,000 290,000 290,000 290,000

Paid-in capital in excess of

par, common stock 70,000 70,000 70,000 70,000 70,000

Retained earnings 80,000 78,000 76,000 75,000 73,000

Total stockholders? equity 489,000 514,000 516,000 517,000 508,000

Total liabilities and

stockholders? equity $711,000 $714,000 $719,000 $722,000 $714,000

DONNA SZABO CORPORATION

STATEMENT OF EARNINGS

Years Ended December 31, 2007?2011

(In thousands, except per share) 2011 2010 2009 2008 2007

Net sales $ 890,000 $ 870,000 $ 850,000 $ 935,000 $ 920,000

Cost of goods sold (540,000) (530,700) (522,750) (579,000) (570,000)

Gross profit 350,000 339,300 327,250 356,000 350,000

Selling and administrative

expense (230,000) (225,000 ) (220,000) (225,000) (224,000)

Interest expense (9,500) (6,600) (6,800) (6,900) (7,000)

Earnings from continuing

operations before income taxes 110,500 107,700 100,450 124,100 119,000

Income taxes (33,000) (33,300) (32,100) (30,400) (37,400)

Earnings from continuing

operations 77,500 74,400 68,350 93,700 81,600

Extraordinary gains, net of taxes 20,000 ? ? ? ?

Net earnings $ 97,500 $ 74,400 $ 68,350 $ 93,700 $ 81,600

Earnings per share:

Continuing operations $ 2.67 $ 2.57 $ 2.36 $ 3.23 $ 2.81

Extraordinary gain 0.69 ? ? ? ?

Net earnings per share $ 3.36 $ 2.57 $ 2.36 $ 3.23 $ 2.81

Note: Additional data:

1. Preferred stock dividends (in thousands):

2011 $3,920

2010 $6,100

2009 $6,400

2008 $6,600

2007 $6,000

2. Common shares outstanding, 29,000,000 (actual) (2007?2011)

3. Stock options outstanding, 1,000,000 (actual) (2007?2011)

4. Dividends per common share (actual):

2011 $3.16

2010 $2.29

2009 $2.10

2008 $2.93

2007 $2.80

5. Market price per common share (actual):

2011 $24.00

2010 $22.00

2009 $21.00

2008 $37.00

2007 $29.00

P 9-3 The following information was in the annual report of Rover Company: 2011 2010 2009 Earnings per share $ 1.12 $ 1.20 $ 1.27 Cash dividends per share (common) $ 0.90 $ 0.85 $ 0.82 Market price per share $ 12.80 $ 14.00 $ 16.30 Total common dividends $ 21,700,000 $ 19,500,000 $ 18,360,000 Shares outstanding, end of year 24,280,000 23,100,000 22,500,000 Total assets $1,280,100,000 $1,267,200,000 $1,260,400,000 Total liabilities $ 800,400,000 $ 808,500,000 $ 799,200,000 Nonredeemable preferred stock $ 15,300,000 $ 15,300,000 $ 15,300,000 Preferred dividends $ 910,000 $ 910,000 $ 910,000 Net income $ 31,200,000 $ 30,600,000 $ 29,800,000 Required a. Based on these data, compute the following for 2011, 2010, and 2009: 1. Percentage of earnings retained 2. Price/earnings ratio 3. Dividend payout 4. Dividend yield 5. Book value per share b. Discuss your findings from the viewpoint of a potential investor. P 9-13 Consecutive five-year balance sheets and income statements of Donna Szabo Corporation are shown below and on the following page. Required a. Compute or determine the following for the years 2007-2011: 1. Degree of financial leverage 2. Earnings per common share 3. Price/earnings ratio 4. Percentage of earnings retained 5. Dividend payout 6. Dividend yield 7. Book value per share 8. Materiality of options (use stock options outstanding) b. Comment from the perspective of an investor. DONNA SZABO CORPORATION BALANCE SHEETS December 31, 2007 through December 31, 2011 (Dollars in thousands) 2011 2010 2009 2008 2007 Assets Current assets: Cash $ 26,000 $ 27,000 $ 29,000 $ 28,000 Accounts receivable, net 125,000 126,000 128,000 130,000 Inventories 140,000 143,000 145,000 146,000 Total current assets 291,000 296,000 302,000 304,000 Property, plant, and equipment, net 420,000 418,000 417,000 418,000 Total assets $ 711,000 $ 714,000 $ 719,000 $ 722,000 $ 714,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 120,000 $ 122,000 $ 122,500 $ 124,000 $ 125,000 Income taxes 12,000 13,000 13,500 13,000 12,000 Total current liabilities 132,000 135,000 136,000 137,000 Long-term debt 90,000 65,000 67,000 68,000 69,000 Dollars in thousands) Stockholders' equity: Preferred stock Common stock Paid-in capital in excess of par, common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 2011 2010 49,000 290,000 76,000 290,000 70,000 80,000 489,000 $711,000 2009 70,000 78,000 80,000 290,000 (In thousands, except per share) 2011 Net sales $ 890,000 Cost of goods sold (540,000) Gross profit 350,000 Selling and administrative expense (230,000) Interest expense (9,500) Earnings from continuing operations before income taxes 110,500 119,000 Income taxes (33,000) 82,000 415,000 137,000 2007 75,000 290,000 70,000 70,000 76,000 75,000 514,000 516,000 $714,000 $719,000 DONNA SZABO CORPORATION STATEMENT OF EARNINGS Years Ended December 31, 2007-2011 2008 $ 27,000 128,000 144,000 299,000 290,000 70,000 73,000 517,000 $722,000 508,000 $714,000 2010 2009 2008 2007 $ 870,000 $ 850,000 $ 935,000 $ 920,000 (530,700) (522,750) (579,000) (570,000) 339,300 327,250 356,000 (225,000 ) (6,600) 107,700 (33,300) (220,000) (6,800) (225,000) (6,900) 100,450 (32,100) 350,000 (224,000) (7,000) 124,100 (30,400) (37,400) Earnings from continuing operations 77,500 74,400 68,350 Extraordinary gains, net of taxes 20,000 Net earnings $ 97,500 $ 74,400 Earnings per share: Continuing operations $ 2.67 $ 2.57 $ 2.36 Extraordinary gain 0.69 Net earnings per share $ 3.36 $ 2.57 $ 2.36 Note: Additional data: 1. Preferred stock dividends (in thousands): 2011 2010 2009 2008 2007 $3,920 $6,100 $6,400 $6,600 $6,000 2. Common shares outstanding, 29,000,000 (actual) (2007-2011) 3. Stock options outstanding, 1,000,000 (actual) (2007-2011) 4. Dividends per common share (actual): 2011 2010 2009 2008 2007 $3.16 $2.29 $2.10 $2.93 $2.80 5. Market price per common share (actual): 2011 2010 2009 2008 2007 $24.00 $22.00 $21.00 $37.00 $29.00 93,700 81,600 $ 68,350 $ 3.23 $ 93,700 $ 2.81 $ 3.23 $ 2.81 $ 81,600